A few basic questions about FOREX

Hi,
I have a couple of simple questions that have been nagging me:


1. How are the prices of currency pairs determined? Is it by the amount of people trying to buy versus the amount trying to sell?

2. Is FOREX the only international currency market? Are all currency trades required to go through FOREX?

3. When a large bank in Spain (for example) trades millions of EUR for USD are they required to do it through FOREX? If not, how does FOREX find out about the trade?

4. Imagine this scenario: Everyone in the world (literally) uses the same automated trading robot. The robot tells everyone to sell USD and buy EUR. From what I understand this would mean that the price of USD would fall to $0 and the price of EUR (as compared to USD) would rise to infinity. Then, when the robot tells everyone to sell EUR, everyone would profit. Obviously this cannot be so. If someone profits it is at someone else's expense; is it not? If this question is unanswerable with the pretense of every single person making these transactions simultaneously, then pretend it is 90% of the world instead of 100%.

I await your input Thanks a lot!

1) Orders.

Forex is just short for Foreign Exchange, it isn't an actual exchange.

Have a read at this http://www.ny.frb.org/education/fx/foreign.html#what

4) I would try and learn about the basics of orders and price discovery , although it good that you are thinking this way.

Regards

Mark

Forex is not a market, it is the result of the exchanges of currencies in all the world supposly in real time. The real time is a fake, there is no real time in Forex and there is no real volumes.

The real market in which you trade when you open an account is your broker and the other clients of your broker if it is a Market Maket, if you trade using ECN/STP your market are the liquidity providing banks of your broker. In both cases, if you win, your broker loses money (also in the ECN, because if the liquidity providers of a broker lose money with this broker, they go away and the broker would run out without banks).

If everybody buy dollars or sell euros for example, at the beginning banks and brokers lose money, because they must to exchange you the currency you want, if the trend continues, the brokers and banks would begin to increase the spread virtually to infinity, the other scenario is that a central bank devaluates a currency that is being selling in all the world: the losers in this case would be the citizens of that country, because they would lose puschasing power or would suffer inflation or both.

1. How are the prices of currency pairs determined? Is it by the amount of people trying to buy versus the amount trying to sell?
You are right. The price of currency depends on its demand and its supply.

When a large bank in Spain (for example) trades millions of EUR for USD are they required to do it through FOREX? If not, how does FOREX find out about the trade?
Bank doesn't trade through the forex.Big banks are marketmakers, they trade with each other without forex. And trading, form demand and supply of currency.