Forex "Behind The Scenes"

Hi there ! realy wanting to know if anyone knows what happends with forex behind the scenes? ... For example .. what is happending when u place an order...how the broker recieves the data....where everything goes from the broker...where the actual money comes from...and from who....

anybody there knowing the whole order process from beginning to end and what exactly happends when you press the buy or sell button from the software viewpoint....

Id like to know what happends in a very in depth manner...


Thanks alot any information or refurals will be more than appreciated!...

I have exactly the same question as yours, and have been searching fruitlessly for answers. I even called a couple of FOREX brokerage houses, but the agents don't seem to have a clue what goes on behind the scenes.

Here's my understanding, at a very high level, of what goes on: A FOREX trade (that is, a retail trade - I'm sure that wholesale trading is a whole different animal) in fact does not involve the actual purchase / sale of two currencies (though this is what the FOREX educational materials would have you believe). Instead, it seems that when you place a trade you're actually placing a wager on what will transpire in the 'real' FOREX market. I don't believe that the money spent on a trade is injected into the FOREX market all. Instead, I believe the money sits in an account held by the broker, and the amount rises and falls based on the position you've taken and the movement of the currencies involved.

So a retail FOREX trader is purely speculating, and not purchasing or selling anything. In this context, the FOREX broker operates as a kind of casino.

That's my understanding. I have no idea if it's correct. Any illumination from more knowledgeable folk out there will be greatly appreciated.

If the broker is not a complete bucket shop he will at least try to always offset the combined net position of all his customers (rounded to the nearest lot size) always and immediately with his own trades in the "real" market to fully hedge his risk. The broker's P&L due to these rounding errors and the time delay is normally distributed with zero mean. The broker's profits arise purely from the increased Ask-Bid spread.

If it is a bucket shop he will indeed speculate against all his customers (and win in almost all cases) like a casino. Traders who are too successful and endanger the casino's profits will be bullied until they quit or immediately thrown out with lame excuses.

the brokers know that most traders are crap, so they'll take the opposite side of the trade and make money that way, hahaha