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.
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.