A general misconception i notice a lot is the fact that when you lose money or you burn out. The broker gets called a thief while in fact im quite sure its not them who get your money.
They get paid for the service on every trade you place (that hits) but they dont get the money you lose.
Now this makes sense but.
Who, in fact, GETS that money you lose ? Its not like it evaporates out of the circulation of economy, or does it ? Is that why banks all across the globe are printing like mad ? Because fx-traders are evaporating money? I doubt it, can anyone provide a clear step by step as to where this money goes down to the nano-cent
please ?
Every time you set a TP or SL, it’s a counter order for your initial order.
Say, you bought 1 lot of EURUSD at 1.35 and your SL is at 1.34 and TP at 1.36.
Your SL and TP are pending sell orders, either of which will be activated when price reaches the set level.
If your TP gets hit, you sell 1 lot of EURUSD at 1.36 to someone who may look to sell it at 1.37.
Remember when you bought it at 1.35 you were expecting to sell it at 1.36 and you did it. If the trader from whom you bought 1 lot of EURUSD didn’t sell at 1.36, he/she would be able to see his lot being worthy of 1.36.
But he/she sold it to you and you took advantage of the 100 pips move.
When your SL gets hit, it means you bought high and sold low. You cannot know how the new buyer would do his lot. People buy and sell and win and lose. It’s a continuous cycle of buying and selling. Some make money while some lose money.
And of course there are some brokers who take counter positions for each trade their customer execute. Since the customers mostly have a low win rate (or a high loss rate in %), the broker always makes money in addition to the spread and the swap.
thanks, so it’s like [I]anonymous bastard[/I] took off with your money since you werent paying attention more like ‘the broker lagged me to get it all’
that clears things out somewhat
No, noone [I]took off [/I]because you weren’t paying attention. You [I]decided [/I]to sell (close your trade) at a certain price and the buyer decided to buy at that certain price 
yes, i do understand that, mister metin, thanks again for taking the time to explain it. You have no idea what people take for granted as common knowledge
Very well put. I think it is important to point out to new traders that they decided to take a certain action and nobody else is to blame for what happens to their trades (money).
i understand your concern and i agree, maybe i was being too metaphorical about it. It is indeed the sole responsibility of the trader when money is lost. Lag can not be blamed on the broker, neither does the broker ‘cheat’ to keep money since its not theirs to keep. The way you explained it in clean, professional, technical terms is something i wouldnt be capable of since im not the best at playing dictionary, so its all in the mind.
And yea, while we’re at it, lag is the reason why buying and/or selling at market price should be avoided when possible. Thats something neither the client or the serverside can completely rule out, right ?
There is a lot of incomplete and incorrect info in the answer here.
Firstly, there is almost NEVER a single person on the other side of your trade. In other words, you will almost positively *NEVER have a trade in which the person on the other side matches your entry time, lot size, and exit precisely. (*caveat being you open and close your trade so fast, your broker didn’t get to pass it off)
What actually happens? When you initially open your trade with almost EVERY retail broker, the trade is taken by your broker. Not because they have a losing percentage advantage, but because that’s how the order is initially filled.
Now, what happens to the order after that is like trying to see through pea soup. But the gist is, there are open trades on both sides. Some in profit, others not. The action of all those trades being open creates a large pool of money that ebbs and flows against each other. When you exit by closing your trade, you’ve either left some money in that pool, or taken some out.
If you’ve lost your trade, your broker doesn’t claim that money, they leave it there. It’s part of the pool of money that pays out profits to other traders at that point.
If the pool becomes imbalanced, the brokers go outside to hedge.
Some points to take away:
*You never have a trade in which there is another person exactly opposite of you. (unless it it your broker)
*You never actually buy or sell ANYTHING. (Look you “Spread Betting” on Investopedia for a better explanation)
*Your money never enters the actual market. It is warehoused by your broker. (think of the house at a casino)
*Your broker isn’t trading against you because you are a loser, your broker just wants your spread.
There’s a lot more to it than what I’ve posted here, but this should get rid of some of the confusion and start you on the right track should you choose to study the subject some more.
Thank you for the exlanation, Master Tang.
I have opened three account at various brokers in Istanbul. All of their contracts include the term that the broker opens a counter trade for each trade opened by the client and they clearly indicate that the broker will lose as the client wins, and vice versa. I know though that not every broker works that way.
Now, one thing I don’t understand. Although the trades are pooled and not actually entered the market, how is it not another person on the other end with a profit or loss whose trade will be eventually closed like I opened and closed my trade?