In order for someone to purchase currency, does that mean that someone would have needed to sell theirs? For example, in a hypothetical situation where no one sells their currency, could someone place a successful order to purchase that currency?
While it is not likely that there would be no currency for sale, is it theoretically possible if no one agrees to sell that particular day?
Thanks
Pippy
Yep! Currency follows basic economic rules just like any other tradeable product.
If you want to buy a loaf of bread you have to find someone willing to sell some bread, and if you want a car your have to find someone with a car to sell. It’s the same with currency. If I want to buy some GBP with my USD I have to find someone that wants to trade his GBP for my USD.
Matching up the buyerss and sellers is the broker’s job. It’s actually the definition of the word “broker.” 
That being said, most of the retail forex brokers aren’t really matching you up to other buyers/sellers. They are market makers… The broker just pays you if you win, and keeps your money if you lose. 
Same as above. Someone has a quote along the lines of ‘The ironic thing about trading is, everytime a trade is made, theres someone else somewhere doing the exact opposite and they both think they’re being clever’
Something along those lines anyway and I quite like it
Thanks Phil,
So that begs my next question. If I am able to buy a lot of $100,000, then that means that someone sold a lot of $100,000 at the same moment that I decided to buy?
Which begs the following question. If most traders were following some kind of technical system where they’re watching their screens and looking for some place to jump in or out of the market, then wouldn’t there be a dearth of possible trades? If too many people are trying to sell their Ford Escort, and not enough people willing to buy a Ford Escort because all these traders are looking at the same screen, does any “system” for trading break down at that theoretical point?
If I find it logical to buy in at a certain point, doesn’t that mean that someone else found it equally logical to sell at that very same point?
That’s my signature, it’s just not showing up in these posts. I’m not sure why…
Yes. But remember it’s possible for both the buyer and the seller to make a good deal at the same time. Just because forex is a zero-sum game does not mean one of the two parties involved is getting a bad deal.
Think of the dealer selling the Ford Escort to you. It’s very possible that you got a good deal on the car [B]and [/B]the dealer made money selling it. One of you doesn’t have to get screwed in the process.
Remember that most of the currency transactions in the world are not for profit! When Coca-Cola wants to turn all the yen they made last year from their Japaneses sales into American dollars they are not trying to make money on the process. In fact they all more than willing to let forex traders make a little profit on their transaction.
We provide liquidity to the market, and Coca-Cola gets their yen turned into dollars. They paid money, we made money, and everyone is happy.
You fall into a common trap here of assuming everyone in the markets at a given point in time is operating in the same timeframe (thinking in terms of what will happen in the next hour, for example) and have the same motivation underlying their actions. Neither of those things is anywhere near the reality of the situation. Some traders are scalping from minute to minute and some are taking positions they expect to hold for months. Some traders are following logical system rules and others are trading totaly off emotion. Some traders are looking to profits from market moves and some are attempting to hedge against them. Some base their analysis on fundamentals and others base it on technicals. All of this comes together in the movement of price over time.
You & I place a bet early doors into London trade on EUR/USD @ 1.4750 with the same broker.
You go long & I go short.
You decide to cash out 20 minutes later at 1.4775, booking 25 pips on a quick London session breakout move.
I shorted at the same price (1.4750) but I take a slightly different view to yours & after moving 40 pips offside, price turns & heads south, closing out the European shift @ 1.4600 where I decide to flatten out & book my 150 pips profit.
Our broker earns his $$�s via the spread on 2 trades, he�s worked his book throughout the shift, laying off & neutralizing his risk + he boasts at least 2 winning punters on the day.
Job done & 3 happy operators.
All the heavies are on this thread!!
All I was going to say is…
Do you really want to buy a Ford Escort?!! 
If it’s a Cossie - then I’ll have one please.
If it’s a pink cabrio from Essex then no thanks.
<This message may not travel well - not unlike a 1.3L Escrot I once had>
if there was an instant buyer for every seller and vice versa wouldn’t price remain constant? isn’t it an abundance of sellers and shortage of buyers what drives price down? and too many buyers and not enough sellers that drives price up? Law of supply and demand?
No I don’t think. Equal amounts of buyers and sellers do not mean no price movement. You can’t have a buyer without a seller and vice versa, but prices still move. More demand puts price up, but there still must be a willing seller.
You’re right about supply and demand moving prices, but prices do still move even though there’s a buyer for every seller.
Think of the forex market as an online auction site…
Say you wanted to buy something off eBay, let’s call it a “widget.” You go to eBay, types “widget” in the search box, and see that there are 100 widgets for sale, ranging in price from $10 all the way up to $50.
So which one do you buy? The cheapest of course! So you place an order for one $10 widget.
Now when the next widget shopper comes along and searches he finds the cheapest one is $11, but that’s a fair price to him so he buys it. This pattern keeps repeating over and over until the cheapest widget is $25.
After this happens the widget buying seems to stop. The buyers drove the lowest price of widgets up to $25, but it turns out that people aren’t willing to pay more than that, so the demand shrivels up and the widgets just sit there.
So what happens to all the widget sellers that really want to unload their merchandise? They lower the price of their widgets until buying starts back up again, and the whole process repeats itself.
What has happened is that the demand for widgets drove the price up, then they became too expensive. Then an excess supply of widgets drove the price back down. This is, basically, what moves forex prices.
hmm that makes sense. I’m an Ebay seller so that put’s in terms I understand
Phil, ever since I was in public school, I’ve been hearing about widgets. It was always used in math examples, and even later in economics class as an example of some commodity. But I’ve never seen one in real life, or even a picture of one. Do you have a link? I’ve lived my whole life without a widget, so I’m wondering what I’m missing.
Are they like door stops, the things you put under a door to keep it from moving? It’s hard to imagine there would ever be such a demand for those that would actually drive the price up. You don’t see a lot of those anymore. I’ve looked for widget manufacturers in the Yellow Pages and there are none. Would this be a good business to get into?
Thanks
Pippylongstocking
Don’t know whether to laugh or cry.
Ironically, there actually [I]are[/I] widgets these days. All the math and economics books are going to have to be re-written.
I have a widget… I keep it next to my round tuit and my box of scratch
Never had one, their nighty rates are to expensive! :eek:
Renting cars is to rich for me!