How do brokers pay your leverage? How does it work?
Hello all. I have this question that I've couldn't find answer for:
What happens when you open leveraged (i.e. 1:100 ) position? Where do your broker find the money to shell out 99K for your 1K? Considering there maybe thousands of clients opening positions (and perhaps many lots at once), where do your brokers find the money of their own to put? Basic math can show that brokers may require to pay HEAVY sums of money. So, who pays your brokers? How are they protected? If you open a position, does that mean that there have to be 99 other people opening at the same price? Is that why slippage occurs (they get the closest bucket fill?)
Re: How do brokers pay your leverage? How does it work?
Since when you buy a currency pair you actually sign a contract and then when you close your position you sign another contract with the same quantity but with just a diference value for each currency, you just have to have the difference between the contract values which is your margin. Thats how I understand the market maybe im wrong
Re: How do brokers pay your leverage? How does it work?
Quote:
Originally Posted by sa_trader
Since when you buy a currency pair you actually sign a contract and then when you close your position you sign another contract with the same quantity but with just a diference value for each currency, you just have to have the difference between the contract values which is your margin. Thats how I understand the market maybe im wrong
So if you scalp and make like 20-30 trades per day (some last seconds) it can mean that your broker is that fast at writing contracts???!!!!
Re: How do brokers pay your leverage? How does it work?
Quote:
Originally Posted by sa_trader
its all automated
Even the accounting and all the legal paperwork???
Few more questions to clarify my original question:
1) When you open a position where do your brokers find the money to add?
2) When you lose all your equity in margin call for example, what covers 100's thousands of broker money from your 2-3k account?
Re: How do brokers pay your leverage? How does it work?
Quote:
Originally Posted by TraderABC
Hello all. I have this question that I've couldn't find answer for:
What happens when you open leveraged (i.e. 1:100 ) position? Where do your broker find the money to shell out 99K for your 1K? Considering there maybe thousands of clients opening positions (and perhaps many lots at once), where do your brokers find the money of their own to put? Basic math can show that brokers may require to pay HEAVY sums of money. So, who pays your brokers? How are they protected? If you open a position, does that mean that there have to be 99 other people opening at the same price? Is that why slippage occurs (they get the closest bucket fill?)
Thank you.
Spot forex deals have a settlement date 2 working days forward, and positions left open overnight are rolled-over, in effect closing and re-opening the position which starts the 2-day clock ticking again.
Re: How do brokers pay your leverage? How does it work?
Quote:
Originally Posted by MickMason
Spot forex deals have a settlement date 2 working days forward, and positions left open overnight are rolled-over, in effect closing and re-opening the position which starts the 2-day clock ticking again.
Mick
Hi Mick!
Question... If settlement date is 2 days ahead, how can your profit or loss be instanteneous after you close a position? Please don't tell me that it is vurtual, because you can use extra money to open new positions.
Re: How do brokers pay your leverage? How does it work?
Quote:
Originally Posted by TraderABC
Hi Mick!
Question... If settlement date is 2 days ahead, how can your profit or loss be instanteneous after you close a position? Please don't tell me that it is vurtual, because you can use extra money to open new positions.
Licensed Brokers
which is your margin. Thats how I understand the market 
Linear Mode
