how to do forex trading
Your trade will not be executed anywhere except on the platform provided by your broker, which will be your liquidity provider. You buy from your broker, you sell to your broker. Think about your broker as the foreign exchange shop you find in an airport where you exchange currencies. You give them one currency in exchange for another at the prices decided by them. They have a spread between the buy and sell price to ensure they make a profit. When it comes to retail shops where you exchange money, the spread is so big that the shop owners will make a profit even if they are stuck with a very large amount of one specific currency and they have to change it at another third party their liquidity provider in order to replenish their stock of the currency in high demand, because their liquidity provider has a much lower spread. When it comes to forex brokers that act as market makers the situation is a bit different, because each trade you open will also be closed at a later time. Unlike foreign exchange shops, where you can buy Euros with Dollars and then spend the Euros elsewhere, when you buy Euros with Dollars from your forex broker you have only one way to spend your Euros: you can buy back dollars from the broker closing your position. This transforms your transaction into a bet against your broker on how the currencies will fluctuate. If you have a profitable trade, your broker will credit your account with money and if you lose, money will be subtracted from your account. But the money you earn from a winning trade come directly from your broker, while the money you lose represent revenue for your broker.
how to currency trade
Small profits will add up and allow your portfolio to grow, so do not get greedy.
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Now, when selling EUR/USD, the trader is not only selling euros but is also buying US dollars at the same time.
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how to do forex trading