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.
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.