hi i’m a bit confused,
lets say i place an order, which is borrowing money from the broker
to buy the lot, and I lose my position and end up getting stopped out.
Does the broker lose money too?
no because when you place a trade, the broker will basically team your long position with someone who placed the same short position. This way the exchange of funds is really done between participators in forex. They don’t lose money because they take the spread on each person.
Now when talking about and ECN or someplace where you are directly in the market and there’s no spread just commission…then I’m not sure.
But from what I’ve read it seems that this is how marker makers/brokers operate. They will, I believe, always allow a trade to be placed even if someone isn’t taking the same opposite position, which is why they need a certain capital requirements. But I think this isn’t the norm for them.
Your margin deposit is the broker’s surety against loss. That’s why they usually have an automatic position closure if the margin call level is reached.