Where are forex trades executed?
Many forex broker managers explain the work scheme to clients like this…
The risk management system installed at the “firm” (registered in the BVI or the Cayman Islands) calculates risks very well and sends not all client orders to the real OTC market, but only their aggregated component exceeding a certain size.
And the rest of the orders are matched by the firm with opposite orders received from other clients. That is, if you have an order for 10 thousand dollars, then it will be executed by you inside the forex broker itself, if for 100 thousand dollars, then it will be executed - by its counterparty, a large international bank, which will take this order for its position. But if you have an order for 1 million dollars, then it will certainly be sent "to the exchange" and executed only there.
This, of course, is not true. Not a single forex broker almost never brings its clients` "deals" to the open market, be it a mythical exchange or a counterparty partner - a large international bank or an over-the-counter market, because they know that the conditions of the game are such that the client will sooner or later lose. Therefore, there is no need to bring deals to the market.
And who, in this case, becomes the second party to the transactions? Where to look for a counterparty? You don`t have to go far - the forex broker itself is the other side of the deal - see Forex trading strategy, for example.
Thus, having entered into an agreement with a forex broker, having brought him money, the client will make transactions with the forex broker itself. In this case, any loss of the client is the gain of the forex broker, and any gain of the client is the loss of the forex broker. And he is the least interested in losing.
The next misconception that Forex brokers are persistently trying to root in the minds of ordinary people is that you can make very good money on the movements of currency quotes. If you only correctly guess the direction of the course. But is it?