Hi i am a newbie
could some one please explain a stupid question…
like in stocks when someone wins the money… it comes from someone else as they bought your stock… so eather both ppl make money or one losses… etc
how does it work in forex? since u are not really trading other ppl… where is the money commig from?
is it basicly a bet against your broker? if u loose the trade they keep the money? how does it work
thanks
While the actual cash received when you sell a stock to someone else does realize your profits, that doesn’t mean they lose when you win. The only way you get a zero sum situation is when you have matching longs and shorts. In the stock market most longs do not have shorts on the other side, so it’s not zero sum. Forex trading, however, is as MattW2009 outlined.
Basically just banks gambling with each other?
Only have limited knowledge of the stock market, but doesn’t the market maker match the shorts if there are not enough of them on a long order?
Market making is the same in all markets. The MM takes the other side of whatever trade, attempting to offset in an opposite transaction elsewhere.
The difference in the stock market, though, is that MMs must carry inventory since there’s an actual exchange of assets in equity trades - unlike futures/forex which are just agreements for future exchanges.
If every bank thinks they’re making money trading knowing that some other bank somewhere has to lose, why do they bother at all. They must know the losing side is going to come round to them eventually?
Because they know from testing their trading methods that they make x% over time. Also, they have far more capitol to trade with, so even a small percentage return still equals a good amount of gain.
Just like any good traders method should involve a good win/loss ratio + winners being greater than the losses.
Who are they taking the money off? Someone is losing.