Who really pays you the profits?? | Forex Factory

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Who really pays you the profits??

  • #1
  • First Post: Jul 23, 2008 8:46pm Jul 23, 2008 8:46pm
Hello to all traders,

This might be a naive question but, who really pays for your $profit$ in Forex??

Does the broker pay from his pocket? does the intebank pay you? Both? http://www.informedtrades.com/images...s/confused.gif
Please help me understand the money flow
Or recommend some resources, Thanks

Greetings

Dimitri
  • #2
  • Jul 23, 2008 8:48pm Jul 23, 2008 8:48pm
Quoting LosTraders
Hello to all traders,

This might be a naive question but, who really pays for your $profit$ in Forex??
When I'm long, it's whoever went short.

When I'm short, it's whoever went long.
Not all sins are created equal
  • #3
  • Jul 23, 2008 8:50pm Jul 23, 2008 8:50pm
Quoting Jay Walker
When I'm long, it's whoever went short.

When I'm short, it's whoever went long.

Thanks for that practical way of understand it, but to expand on the idea what would be the chain...
like??

MY money>>>to broker>>>>Interbank>>> PROFIT>>> broker>>> ME??
Or how?

THANKS AGAIN
  • #4
  • Jul 23, 2008 8:56pm Jul 23, 2008 8:56pm
Quoting LosTraders
MY money>>>to broker>>>>Interbank>>> PROFIT>>> broker>>> ME??
Or how?
Ideally, it would be like that with all brokers.

Ideally...

But the reality of bucket shops is that they can, have, are skipping the interbank step altogether.
Not all sins are created equal
  • #5
  • Jul 23, 2008 9:04pm Jul 23, 2008 9:04pm
Quoting Jay Walker
Ideally, it would be like that with all brokers.

Ideally...

But the reality of bucket shops is that they can, have, are skipping the interbank step altogether.
Thanks for your quick reply.
What i understand from bucket shop is that the broker does not send your

market order directly to the interbank, right? and prefers to take the risk and

wait for you to lose and then that money is for him and doent go to the global interbank market??

Am i correct or im missing something?
  • #6
  • Jul 23, 2008 9:32pm Jul 23, 2008 9:32pm
Quoting LosTraders
Thanks for your quick reply.
What i understand from bucket shop is that the broker does not send your

market order directly to the interbank, right? and prefers to take the risk and

wait for you to lose and then that money is for him and doent go to the global interbank market??

Am i correct or im missing something?
That would be correct. In the bucket shop scenario, your profit is coming from someone else's account at the broker. Of course, this is all advantageous for the broker since not everyone is going to be a winner and they're betting on the few winners and their profits being dwarfed by the losers, since they get to pocket the difference. Of course, even the profitable guys are paying the broker too, in spreads and commissions.
Never underestimate the powers of the Force.
  • #7
  • Jul 23, 2008 10:31pm Jul 23, 2008 10:31pm
Quoting The Jedi
That would be correct. In the bucket shop scenario, your profit is coming from someone else's account at the broker. Of course, this is all advantageous for the broker since not everyone is going to be a winner and they're betting on the few winners and their profits being dwarfed by the losers, since they get to pocket the difference. Of course, even the profitable guys are paying the broker too, in spreads and commissions.
Gracias! for the information Jedi. Just a follow up question. If the broker sees

that you know what you are doing (making consistent profit)does the broker

put you through directly to the interbank market?

And if thats the case then i guess another interbank user pays you your

profit. Does one loser pay one winner or do all the losers pay to all the winners? or how does it work?

Thanks again
  • #8
  • Jul 24, 2008 1:32am Jul 24, 2008 1:32am
Quote
profit. Does one loser pay one winner or do all the losers pay to all the winners? or how does it work?

It's a general pool. All loser's money goes to the broker, winner's comes from the broker. The bucket shop broker loses money when people win, but they've had a lot of time to perfect this science.

If your account shows a consistent positive balance or if you're trading a pair with a strong trending characteristic your trades will usually get added to an aggregate trade pool, the sum of which is traded w/ an outside bank. That way large winning streaks or profitable traders don't bankrupt the broker, that risk is passed on.

Of course some brokers are too lazy or incompetent to do this, so you'll see a consistent negative trend in their cash reserves, then eventually poof... bankrupt, and away goes your money.

In the case of large orders placed directly w/ an interbank broker, the money comes from whoever took the opposite side of your trades. That could be 1 person or a hundred. It merely makes a stop thru the broker.
  • #9
  • Aug 8, 2008 5:05am Aug 8, 2008 5:05am
Hi Guys

Don't know whether this is the appropriate place to post this question being a newbie but anybody got any experience of the broker ODL?

Thanks

Ian
  • #10
  • Aug 8, 2008 5:16am Aug 8, 2008 5:16am
Quoting smatrader
Hi Guys

Don't know whether this is the appropriate place to post this question being a newbie but anybody got any experience of the broker ODL?

Thanks

Ian
see http://www.forexfactory.com/showthread.php?t=97934
  • #11
  • Last Post: Aug 8, 2008 6:25am Aug 8, 2008 6:25am
Hi itangsanjana

Thanks for the link...it's a start.
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