Where does the money come from?

Hello everyone, Im not terribly new to forex or trading, but I am still wondering on where the money comes from if I make a lot in trading. For example… If I make 10 million dollars at forex and I want to withdrawal that… does the money come from the market or my broker? Will my broker suffer the more I make? or does the broker receive the 10 million dollars, take out the fee’s and then transfer the rest to me? I dont know… hope I made sense .
thanks everyone

happy trading

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I am still learning, but this is how i see it.

When you close the trade, the broker takes the profit from the spread. So, 2-3 pips worth.
Everything else goes straight into your account as profit.

You withdraw it at will.

I wouldnt accept this as a true answer because ive never actually done it… only practice money.

The money comes from the person or people on the other side of your trades. If you’re winning, somone else is losing, and vice versa.

Hey thanks rhodytrader! I was thinking that but wasn’t sure if it was the same as stocks. But I appreciate it very much. you too simple101!

To add on to this… can you clarify a little more about the money that we small-fry traders would be winning?

I know that the majority of the market movement is from institutional traders (is that like 75%?) So I always believed that my tiny account was just picking up scraps from their slop.

I could be wrong about this, but I thought I read somewhere that Oanda has their own market among themselves. So if that was true, it means that my win is another Oanda user’s loss, right? And at some point, if they were to become imbalanced, then they as a broker would equalize in the interbank market with other big players, right?

At any given time, if I am winning a trade, do you think I am more likely taking it from another small retail trader? Or taking it from the slop of a large institutional player?


[B]Hey, dusktrader[/B]

According to all the estimates I’ve seen, the percentages are roughly [B]90% institutional, and 10% retail[/B]. The BIS says that the best estimates are in the 8-10% range for retail.

In a series of calculations that I made recently, I used 9% retail / 91% institutional. Here’s a table of estimated trade sizes and trade volumes that I posted on the [I]Forextown[/I] forum recently:


You will never know, and there is no conceivable way to know.

The situation for winners and losers in the forex market is very similar to the situation for winners and losers at the racetrack. If you bet $100 on [I]Greased Lightning[/I] to win in the 5th race at Belmont, and he wins, paying $6.40 (on a nominal $2 bet), whose $320 did you win?

Not only is there no way for you to find out, but the racetrack could not possibly answer that question, either.

If you are trading with a big market making broker like Oanda then most customer positions are matched up against other customers. Whatever isn’t will be against Oanda. Of course, Oanda will hedge imbalance elsewhere, so while retail forex is largely self-contained, it isn’t completely so. Some money will flow to/from the inter-bank market, so as Clint noted, you’ll never know for sure who’s money you’re taking when you’re winning.

and the other person is usually the broker!

Thanks rhodytrader. This brings up another question I have:

Say in the case of Oanda… that most of the trades are handled “inhouse” (within their pool of other Oanda traders)… what is it that actually affects the price movement?

For example, what if we said that 95% of trading orders on Oanda were able to be filled without Oanda hedging the interbank market. That seems like a reasonable estimate since the pair-sentiment indicators they publish are frequently nearly balanced shorts-to-longs.

In this scenario, Oanda could theoretically create their own price action, based on the real demand and supply for the currency pair (among their 95% organic activity). Yet we typically see that most brokers match most other brokers price feeds (right?)

So which is more correct:

  1. The large broker is setting price based on the interbank feed, because they know they can hedge at this price if needed. It also takes into account geopolitical events that occur outside the infrastructure of the broker itself;

2) The large broker sets price based on the realtime supply and demand that their large pool of traders is currently driving.

PS: Clint: thanks for the link – I’ll read up on that! My guess is that our success as retail traders is dependent on the giant elephants in the room.

This is the correct one. The broker is always at risk of trades being done “away” if their pricing isn’t in line with the broader market - which is also true of inter-bank dealers, of course.