i read a lot of posts that relate to FX BANK traders or some calling them PRO traders, and people talk not really knowing much about their trades.
i had the privilege of working inside a dealing desk in a headquarters of a commercial bank ( eastern europe ) and i know what's the action in it.
forex traders in bank headquarters are different than us. in many ways
firstly , they dont work with their money, they work with bank's money
secondly when trading interbank the minimal amount increment unit is half million . and when they say 'i bought 2.5 euro at 35 is 2.5 million euro at 1.0935. notice they also don't mention the bulk 1.09 in the 1.0935 for ease in conversation
thirdly , they have certain tiers they work with , in which they are the intermediary
the first tier is the other banks
the second tier is the bank's speculative reserve
the third tier is the bank customers ( which is represented by their branches) , in fact they rarely talk with customers directly, rather with branch bosses - remember , they work in the headquarters of the bank
they work a price on a big transaction interbank function of the general sentiment of customer needs
in the morning they know how much money in a specific currency their customers requested the previous day, and if they need overall money inthat currency they would go on interbank market and get that currency in exchange for whatever currency the bank has on hold and in which location
yes, location. the tarnsfer is electronic between banks, but is still a transfer and there are paperworks to be settled for a transfer
for example i need euros for british pounds. my clients need euros to pay for an import of merchandise, and i have a lot of GBP that is sitting unused in a bank in germany . i find a swiss bank that accepts to buy my GBP for euros at the price i like . then i will give the order to the german bank where i have a deposit to pay to the swiss bank the amount of GBP exchanged and i give the second order to the swiss bank to send me the euros i bought to a specified location ( an account in euro the bank have in some location - another bank)
then they will get to the client tier and sell the euros they bought for the gbp in the national currency the bank is in AT THE PRICE they deem reasonable (FX market makers in the client-bank relation
this is how it's done
in the meantime other traders may buy and sell to speculate but these are small amounts compared with what's working towards client needs, and they have always limits on what they trade, how they trade, etc
i hope this clears some thoughts about the REAL BANK FX DEALERS
i had the privilege of working inside a dealing desk in a headquarters of a commercial bank ( eastern europe ) and i know what's the action in it.
forex traders in bank headquarters are different than us. in many ways
firstly , they dont work with their money, they work with bank's money
secondly when trading interbank the minimal amount increment unit is half million . and when they say 'i bought 2.5 euro at 35 is 2.5 million euro at 1.0935. notice they also don't mention the bulk 1.09 in the 1.0935 for ease in conversation
thirdly , they have certain tiers they work with , in which they are the intermediary
the first tier is the other banks
the second tier is the bank's speculative reserve
the third tier is the bank customers ( which is represented by their branches) , in fact they rarely talk with customers directly, rather with branch bosses - remember , they work in the headquarters of the bank
they work a price on a big transaction interbank function of the general sentiment of customer needs
in the morning they know how much money in a specific currency their customers requested the previous day, and if they need overall money inthat currency they would go on interbank market and get that currency in exchange for whatever currency the bank has on hold and in which location
yes, location. the tarnsfer is electronic between banks, but is still a transfer and there are paperworks to be settled for a transfer
for example i need euros for british pounds. my clients need euros to pay for an import of merchandise, and i have a lot of GBP that is sitting unused in a bank in germany . i find a swiss bank that accepts to buy my GBP for euros at the price i like . then i will give the order to the german bank where i have a deposit to pay to the swiss bank the amount of GBP exchanged and i give the second order to the swiss bank to send me the euros i bought to a specified location ( an account in euro the bank have in some location - another bank)
then they will get to the client tier and sell the euros they bought for the gbp in the national currency the bank is in AT THE PRICE they deem reasonable (FX market makers in the client-bank relation
this is how it's done
in the meantime other traders may buy and sell to speculate but these are small amounts compared with what's working towards client needs, and they have always limits on what they trade, how they trade, etc
i hope this clears some thoughts about the REAL BANK FX DEALERS
The risk is what gives value to an investment.
