It’s probably a stupid question but i was wondering where the money comes from. I’m 21 and a student i do not have an income, if i go to a bank for a 100 000€ loan i well never get it, here someone just gives me 100 000 to trade with without pretty much asking for any proof, … First i thought it was because we paid overnight interest on this money which i guessed was more than the normal interest rate. But in the school it says that if you are in the trade the other way you receive interest instead of paying it which means a break even situation for the money provider?
Also on carry trades you get the interest differential, where does this interest come from? I mean it’s in the forex exchange not in bonds on the other side is it?
I’m probably missing something hope someone can point it out to me
You never borrow money, what you’re referring to is what’s known as a “notional value”. We speculate on the FX markets.
So as you have said, you could open an account with $1,000 USD, and with 1:100 leverage you have a notional value of $100,000 which can be used as a position size. However, once you lose $1,000 in real money terms your account is bust.
+1. A lot of new traders seem to be confused. Keep one thing in mind: There is no such thing as free money. A broker will never risk funds, that would put them out of business faster than a trader can open a new account. As Jezzode said, you will only risk/lose your own money which you deposit.
Same with bonuses, they are advertised as free cash but look at the terms and conditions and you will realize that for each $1 you get you will make the broker a lot more than that before you can realize the bonus which is why I usually advise against bonuses.
So what you’re saying is that the other 99 000 isn’t there? it’s just some digital sheet that puts it there temporarily? i thought the full amount had to be there from someone (bank/broker/…) okay that confused me, thanks for the answer, and about the interests on carry trades?
