How is price anchored to reality?

As I understand it:
In trading Forex, we are essentially making a judgement about a chart using TA, and then exchanging long and short contracts (CFDs measured in lots?) with other traders. Let's put theories of IPDA and manipulation aside for a moment. If more traders are interested in longs, price goes up. If more traders are interested in shorts, price goes down. We speculate on where we think the price will go, but we never buy or sell any actual currency.

So my question is, how is the price of these CFDs we exchange actually anchored to an exchange rate between 2 currencies? I would expect that over time, the price in the CFD market would drift away from what the actual exchange rate is.

When trading crypto futures on Binance, there is a machanism whereby longs pay shorts, or shorts pay longs, every 8 hours. Who pays who is dependent on whether the futures price is above or below the spot price. I can't see anything like this is Forex. We pay or receive swap when holding overnight, but this is dependent on the interest rate in the country of each currency in the pair, and the long and short swap rate added together is always a negative number.

Maybe I'm missing something glaringly obvious, but any insight is greatly appreciated. Thanks.

That's an interesting question, and my answer is based purely on conjecture (CFDs are not allowed in the USA). I'd assume a CFD is always priced higher than spot price, so they will "never" be equal, but the delta between the CFD price and spot price likely fluctuates. What causes futures prices to gap with spot prices (besides economic factors like inflation)? And what causes the gap to narrow (besides approaching the contract date)? Are those the issues?

I know I'm not answering your question, and I plan to check back to find out what others have to say.

CFDs are derivatives of spot, so you don't participate in the market directly. The broker is your counterparty and they may or may not hedge off the net balance to the real spot market. Alpari didn't and went bust but that's another story. The price actually mirrors spot to the pip (aside from illegal price shading), but because of the obvious conflict of interest, you'll see price-freezes, slippage, terrible execution etc to varying degrees depending how shady they are. Metatrader has the functionality to screw clients in built into the platform, so be aware.

So yes it's different from futures, ECNs, EBS, Reuters etc which works off real order matching.

Forex CFD (Contract for Difference) prices are anchored to reality through real-time market prices. These prices are based on the exchange rates of the underlying currencies and are constantly updated to reflect changes in the market. The price of a Forex CFD is determined by the difference between the buy and sell prices of the underlying currency, with the broker acting as the counterparty. The prices are also influenced by various economic and political factors that affect the currency markets.

thanks. I'm using Global Prime, who say they send all clients trades to the market and provide trade receipts to do this.

and they might - it's a competitive market so this kind of semi-ECN model is touted around a lot, FXCM say the same about their larger accounts. I've never used them but it's pretty simple to check real spot prices and see what kind of execution you're getting which is what counts. CFDs have loads less regulation around them than genuine ECNs, so keep your eyes open. Price should never drift from spot - though execution might.