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What happens?

  • #1
  • First Post: May 30, 2010 3:24pm May 30, 2010 3:24pm
Greetings All -

I'm brand new to FOREX, have read quite a lot of introductory material to help get my bearings, and have a fairly basic grasp of trading nuts and bolts. What I don't know, and would very much like to know, is what happens behind the scenes. That is, when you place a trade, what happens? (in terms of flow of funds)

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. Thanks in advance.
  • #2
  • May 30, 2010 8:47pm May 30, 2010 8:47pm
Quoting realjonasbro
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. Thanks in advance.
Sort of... Reading this post I wrote up awhile ago will give you a better idea of the structure: http://www.forexfactory.com/showthread.php?t=7484
  • #3
  • May 30, 2010 11:01pm May 30, 2010 11:01pm
Darkstar- Absolutely legendary. I'll peruse your posts and be back at you with questions. Really appreciate this.

Writing a book on the subject is a great idea, though I wonder if you'll get pushback from the brokers as they'd probably prefer to keep secret what goes on inside the machine.

Best regards,
realjonasbro
  • #4
  • Jun 1, 2010 2:51pm Jun 1, 2010 2:51pm
Thanks for your advice. As I'm brand new to FOREX, I'm being extremely cautious about going in.

I took a glance at all of your previous posts, and all appear to make the same point that you made here. May I ask why you're so down on FOREX?
  • #5
  • Edited 3:36pm Jun 1, 2010 3:25pm | Edited 3:36pm
Quoting realjonasbro

I took a glance at all of your previous posts, and all appear to make the same point that you made here. May I ask why you're so down on FOREX?
Reading a couple of his previous posts it seems he was a total novice trying to learn how to trade up to March 2009, then in October it looks like he gave up and branded forex a scam and impossible to profit from!

I dunno, is 6 months really enough time to thoroughly learn the business and become consistently profitable? I mean I know trading is pretty simple but it takes some people years to get the hang of it, if ever!
  • #6
  • Jun 1, 2010 3:59pm Jun 1, 2010 3:59pm
Quoting pipmutt
Reading a couple of his previous posts it seems he was a total novice trying to learn how to trade up to March 2009, then in October it looks like he gave up and branded forex a scam and impossible to profit from!
hahaha I had just noticed that last night as well. If everything in forex is a scam and no one can do it I just wonder why waste time to whine and cry about it.

Typical loser statements though, he couldnt hack it so no one can. Dude needs a better hobby...
  • #7
  • Jun 2, 2010 8:45pm Jun 2, 2010 8:45pm
DarkStar - Thanks again for pointing me to your previous series of posts that address the structure of Forex brokers. As a rank newcomer to this, some of the material didn't register with me -- that will be remedied if / as I plunge deeper in -- but I followed the overall context and flow. Very well organized and written.

Curious - how did you come by your knowledge of the behind-the-scenes working for Forex? I assumed that you work or worked in the business?

A few questions:

Does a Forex speculator have the option of trading through a broker or via an ECN?

You reference a graphical presentation in your post ("Looking at an ECN platform or Level II data on the stock market, one can get a feel for what the orders on EBS look like"), but the presentation is not there. Can you make it available?

I'm still unclear on the basic mechanics of the trading process. When a speculator places a trade, what happens? The literature I've read indicates that in placing a trade the trader purchases one currency and sells another. I believe this is not truly the case, though. My sense is that speculators are in effect placing 'side bets' on how the currencies will move in the 'real' market (probably a highly simplified characterization of what really goes on). If the trader is not buying and selling currencies, then what happens to the trader's funds? If the funds are not injected directly into the Forex market, then where do the funds go? Can you outline the basic transactional steps that take place when a trade is placed?

Thanks again - much obliged.
  • #8
  • Jun 2, 2010 9:03pm Jun 2, 2010 9:03pm
You have to be 10x more cautious than you think. And once you start trading you have to trade 10x smaller positions than you think and then you have to trade 100x less frequently than you want to.

That'd be my advice. GL!


Quoting realjonasbro
Thanks for your advice. As I'm brand new to FOREX, I'm being extremely cautious about going in.

I took a glance at all of your previous posts, and all appear to make the same point that you made here. May I ask why you're so down on FOREX?
  • #9
  • Jun 2, 2010 9:43pm Jun 2, 2010 9:43pm
Unk - Good advice. From running my practice account, I see exactly what you mean. It's ridiculously tempting to pull the trigger and trade, and easy to convince yourself that you'll be in the money by simply riding a trend. I definitely can see how, if you aren't careful, you can drop a bundle in a flash.

As a very wise man once said, 'if it was easy, everyone would do it.'
  • #10
  • Jun 6, 2010 2:00am Jun 6, 2010 2:00am
Quoting ForexDude
dont risk your hard earned money in forex... stay away as much as you can from this...

take my opinion or don't take, its up to you... But then don't whine when you lose it all... Forex is like gambling, PERIOD.
whats your problem mate?

why do u even hang arround on forex forums when u know no one can make it in this profession.
  • #11
  • Jun 6, 2010 2:32am Jun 6, 2010 2:32am
Quoting ForexDude
dont risk your hard earned money in forex... stay away as much as you can from this...

take my opinion or don't take, its up to you... But then don't whine when you lose it all... Forex is like gambling, PERIOD.

Why do you say this? Have you had a bad trading experience?
  • #12
  • Jun 6, 2010 9:35am Jun 6, 2010 9:35am
Quoting ForexDude
dont risk your hard earned money in forex... stay away as much as you can from this...

take my opinion or don't take, its up to you... But then don't whine when you lose it all... Forex is like gambling, PERIOD.
ForexDude - As a 'Rookie' I greatly appreciate the advice of those who have preceded me into Forex. You've posted the same comment twice on this thread, so it's evident that your negative view of Forex is strongly held. I'll also assume that you're motivated at some level by a desire to help another avoid the problems that you evidently experienced. Thanks for your concern. It certainly would help to know some more details about your situation. Can you elaborate on what you went through?

Regards,
rjb
  • #13
  • Jun 29, 2010 3:48pm Jun 29, 2010 3:48pm
ForexDude, you've been posting similar comments like this since October of last year without providing any specific reasons why. If you do so, your comments should have more impact, otherwise you're wasting your time.

Quoting ForexDude
dont risk your hard earned money in forex... stay away as much as you can from this...

take my opinion or don't take, its up to you... But then don't whine when you lose it all... Forex is like gambling, PERIOD.
  • #14
  • Jun 29, 2010 4:01pm Jun 29, 2010 4:01pm
Darkstar - If you're out there - would greatly appreciate keeping alive the dialogue that you initiated.... Please have a look at my reply to your last post on this thread and let me know your thoughts.

Thanks much,
RJB
  • #15
  • Jun 30, 2010 1:32am Jun 30, 2010 1:32am
Quoting ForexDude
save ur money dude.. dont waste one cent in this tricky market.
I think forex trading is profitable business in these uncertain times. People are earning hundreds amd thousands of dollars trading forex. It will be profitable to risk in forex what you can afford to lose. Forex is excellent business opportunity.
  • #16
  • Jun 30, 2010 2:12am Jun 30, 2010 2:12am
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.


What happends is very simple. If you think Forex Market operate same way as casino do, then better you take your time and consider seriously before you even think to wet your feet in it. You must take this as an investment not as gamble, other wise you will be another guy who lost his money and blame forex for it. If you would like to understand what Forex is all about please read some posts and ask for education links. You must understand the fundamental basics and realize what you geting in to.
  • #17
  • Last Post: Jun 30, 2010 2:46am Jun 30, 2010 2:46am
Quoting Hercuok
What happends is very simple. If you think Forex Market operate same way as casino do, then better you take your time and consider seriously before you even think to wet your feet in it. You must take this as an investment not as gamble, other wise you will be another guy who lost his money and blame forex for it. If you would like to understand what Forex is all about please read some posts and ask for education links. You must understand the fundamental basics and realize what you geting in to.
Good post. Forex trading transactions worldwide are worth $3 Trillion per day. Forex is the biggest business and also the most profitable (I think).
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