Question 1: Who the **** gives our profit and takes our loss.
Example for your understanding 
Let us assume, In the world there are only 100 Traders, They all Buy the same currency pair and they attain the profit of 1000 Pips. In this case who is the Guy here going to settle their Profit.
If you know the answer and you laugh at my question, I Never mind. Tell me the answer.
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You cant have buyers without sellers, and if there are only 100 traders and they are all buying, who is selling?
Eventually the buyers become the sellers, and they will sell at a higher price to a new set of buyers that are willing to pay the higher price.
In natural supply and demand you always have buyers and sellers so your example would need both, in which case you would then have people buying and selling ammongst each other creating a āmarketā.
I think you unintentionally illustrated a good point about why a person should not trade in illiquid markets. Sometimes buying completely dries up and it can wreak havok. It can even happen in ultra liquid markets if a black swan event occurs.
Thank you Krugman, I am a newbie here and zero in economics. Hope you donāt mind if i ask these kinds of questions in future ā¦
Welcome! You are in the perfect place to learn everything you need to know about all things Forex and trading. Good luck and hope to see you around in the forums!
Two points here:
This is one reason why we have market-makers - they provide much of the liquidity in the market. Whether it is a broker or the interbank market, the market-makers set both a bid and an offer price and the client can hit either of these. Whether the market-maker keeps the resulting position exposure or, more likely, passes it on to another client or market.maker, depends on their own position and objectives.
It is worth remembering that the forex market is made up of far more than retail traders speculating for their own fistful of dollars. Very many transactions are not speculative at all - or seek their profit from something other than the ensuing change in exchange rate. For example, international trade - every country needs regular supplies of oil, for example, and oil is mostly priced in USD. Therefore every country buys USD with their own currency to settle their invoices. Similarly, if a business wants to buy or sell products in another country with a different currency, then they do so at current rates and their profit comes from the product concerned not from their forex transaction.
Rather a simplistic explanation, but maybe helps you to see that there are many different interests in the forex market and they are not all just speculating by any means - and therefore there are lots of interests on both the buying and selling side of the market pumping in the volume - and with the market-making specialists in the middle of it all lubricating the business.
I use Eur/Gbp in my business, because I both buy and sell in Eurozone and UK I need to operate two currency accounts.
When Euro rises and GBP falls then by definition GBP has become ācheaperā and Euro has risen in value vs GBP.
So if I exchange Euro, i.e. sell Euro and buy GBP Iām getting better value - hence Iām buying GBP as it falls.
The opposite side is my provider, he is selling me the pounds as they fall - two happy campers
Petermaā¦ Thank youā¦ I understoodā¦