Whose money am i earning?

i found an article online which says that in actual fact they do not earn off spread. now that doesnt make sense to me.

and given the fact that forex is meant to be a “zero sum game”, when i make money thru trading and submit a withdrawal from my brokerage, whose money am i actually withdrawing? the market participants(other traders that lost) or the broker’s.

Technically speaking, if your broker is your official counter-party (which is often the case) then your profits come at their expense.

More broadly speaking, retail traders mostly offset each others’ positions, so they are transferring money back and forth between themselves. There are imbalances, though, which means the liquidity providers are on the other side of some retail trader positions. In the grand scheme of things, though, since retail traders are net losers collectively, the liquidity providers are making money. That means any winning individual traders are essentially taking money from losing ones.

hi sir, thanks for your reply,
i was reading thru my broker’s terms and conditions and i guess you are right…



based on this, one might question if an order does actually make it into the market at all. behind the scenes they might be like greece taking from here to patch the hole there. so say if SNB happened again and this time everyone was on the winning end, guess they too might file for insolvency as they cant pay everyone if everyone is a winner.

Forex is really zero sum game. Someone buy and someone sell to make the price of a pair. But don’t worry, maybe you’re earning money from an interbank, and your earning is nothing with them.

But go deeper, not only forex, everything in this world are zero sum, like eating in a restaurant, so you don’t eat in another restaurant, the restaurants you don’t eat lose their investment. :smiley:

Its not zero sum for that chicken you just ate :slight_smile:

You are correct in your observation. To play on words, the greatest trick your (and mine) broker every played was to convince us we trade the markets. ECN or DD does not matter.

I think, its the money of forex broker.

In practice, it’s going to be your broker. If you’re profitable, I believe an “ECN” or “STP” broker may hedge or pass on your trade to a liquidity provider to protect themselves, or they may even copy your orders.

+1 on that.