When I buy or sell a currency, does it mean someone sells the currency to the broker then gives it to me? I understand in stock, it works that way. So if there’s no buyer then I can’t sell my currency? If someone wins someone loses. in the exchange?
Most times a 3rd party will be the other side of your trade to sell (or buy) then to close your trade (take profit reached or stop loss reached) then maybe yet another 3rd party will be the other side. To be honest it doesn’t really matter who or how liquidity is provided just so long as you focus on your strategy. Sometimes the broker may be the party the other side of your trade.
No, that wouldn’t be possible. Some brokers offer 500:1 and above leverage, they’d have to have trillions to be able to send every order through to the actual market.
The broker takes the other side to your position. You are basically giving money to or taking money from your broker.
When we say you are “buying” a currency as a private retail forex trader, you are not actually buying anything. You are placing a bet that the exchange rate of that currency to another will rise. If the rate rises, you gain profits in the way that an owner of the currency would likewise gain, so you get the same benefits of an owner but without owning the actual money.
The reverse also applies when you “sell” a currency. You are simply betting that the exchange rate will fall and if it does fall you will gain in the same proportion.
For some people the idea that we are betting rather than buying and selling is uncomfortable.
If u r retail trader then the broker is your counterparty, u sign this when u open a new acc under conflict of interest…so your loss is probably broker’s profit. Now if you play big amounts then things changes and broker puts u in A book, to avoid the risk, but for this to happen you must have really big accounts, 100-200k so you are not considered a retail trader, cheers
so with brokers like hugosway, it benefits them to try and screw you. They can time your trades have them benefit and you lose, with say scalping. Thanks for the response guys.
If you trade CFDs (and most of forex brokers like Hotforex, Tickmill, XM, Exness offer this type of contracts) you don’t need to buy or sell currency physically. The purpose of this contract is that one party pays to the other the difference between exchange rate at the start and exchange rate at the end of the contract multiplied by contract size.
If there is liquidity (some dealer or bank willing to enter into the contract with you at both sides of the contract) then you can trade forex without exchanging currencies. It’s wonderful!
I see so much garbage posted by many in this thread. The broker DOES NOT take the other side of your trade. The broker just adds a spread and depending on the type of account you trade a commission. The are your connection to the liquidity of the market. No one really knows who takes the other side of your trade. It may be you buy from somebody’s take profit order to enter your trade and sell to another persons stop loss order to exit. But no one really knows who. The only thing you need to worry about is that there is liquidity to enter and exit. And for majority of retail traders there is very little to worry about.