A question

Beginner Questions
#1

I have been reading the “Preschool Lessons” and stumbled upon a paragraph:

Unlike in trading stocks or futures, you don’t need to go through a centralized exchange like the New York Stock Exchange with just one price. In the forex market, there is no single price that for a given currency at any time, which means quotes from different currency dealers vary.

Then why do I see a single price (I mean a pair sell/buy price) when I use trading212 to deal in forex?

#2

The rate that you see is related to the rate used by your broker and/or its liquidity providers. There are multiple forex ‘pools’ that trade based on their own rate. Dependin which ‘pool’ your broker is connected to the rate can be different.

For you as a retail trader only one rate matters (unless you are into arbitrage) -> the one presented to you. But you should not be too confused when you see that the rate is somewhere a bit off in relation to what your are presented.

#3

Hmmm…this gives me an idea…could you use the same account (I mean bank account) for 2 brokers…this leaves a lot of room for speculation…you can buy from one and sell to another…if the course rises you are going to obtain profit anyway…if the course is slightly better for you to sell the currency at another broker you are going to win even more…am I right?

#4

In theory it sounds good, but in reality you won’t be able to achieve that unless you have an EA that monitors the two accounts and places trades for you.

#5

What does EA mean?

#6

That is called arbitrage.

  • One problem that you are having is that you do not trade from a single 'bank’account directly (as you proposed). Your money will be segregated between the two brokers so you need to transfer money.
  • Another problem is that you have to pay a fee to your broker for every trade. Arbitrage differences are often so tiny that its profit from it will be gone from the fee that you pay your broker.

I can mention a couple of other issues, but the message is: it will not be worth it.

EA means: Expert Advisor. That is an script with what you can automate your trading.