When you lost money is forex is it...........?
When you lost money in forex trading, do you lost to your broker or to some financial institution.
I ask this in order to understand forex very well. That question is given me a lot of headache. Your comment will be highly appreciated.
Thanks
The best way to look at it is to think of a big pile of money on the table with everyone trying to grab it. You only lose money when you throw it on the table and then run away because the table is moving and it's driving you insane. Its a confidence trick, the market scares you into giving away your money because you are afraid of losing it, and it keeps doing it until you have no money left so you cant be scared any more. he he.
The best way to look at it is to think of a big pile of money on the table with everyone trying to grab it. You only lose money when you throw it on the table and then run away because the table is moving and it's driving you insane. Its a confidence trick, the market scares you into giving away your money because you are afraid of losing it, and it keeps doing it until you have no money left so you cant be scared any more. he he.
When you lost money in forex trading, do you lost to your broker or to some financial institution.
I ask this in order to understand forex very well. That question is given me a lot of headache. Your comment will be highly appreciated.
Thanks
I admired your response, but i don't think the question been answered .
It does not matter who gets his money, that is the point, what matters is that he has given it to them. Its impossible to trace which money goes where, its too complicated. There are a few simple scenarios however; if a broker does not hedge your trades, and you lose, the broker gets the money for taking the unhedged risk. But on the other hand if he calls it wrong, he pays you. But if he hedges your trade and you win, you take money from one of his counterparties. likewise if he hedges and you lose then his counterparty wins. But then you apply the same logic to the counterparty; if they don't hedge your brokers bet with another counterparty and they call it wrong, then they lose, visa versa if they win. This will go on infinitely up through untraceable levels of counterparties, until the biggest fish are taking on the wholesale risk. So its safe to assume, that if your broker hedges and his counterparites also hedge until everyone has taken a peice of the spread, the money that comes into your account is from the biggest fish. The banks.
In a busy FX market, and with the right stops, a broker wont try to squeeze you, because it will have to take on too much risk for too little reward. Here is a little story... one day i was trading Euro and i was laddering my bids to the upside, i think there was around 15-20 bids. The market took out all the bids, it took the last bid out right at the last pipette of its upward surge. Then the market started to tank heavily and i swore to myself i was being scammed, i was jumping around the room spitting nails and wanted to kill someone, and there and then i decided to close my account. This market was so obviously being manipulated against me. But the thing is, i went to log out and realised i was trading on a demo account!!!
Take from that what you will, it wont matter, because we are hard-wired to suffer on every trade. The tension, the unease, the stress, creates the need to form some benchmark narrative in our heads. We are so riddled with biases and blind-spots that sometimes i fear for classical notions of self. Here are a few of them;
Anchoring – the tendency to rely too heavily, or "anchor," on a past reference or on one trait or piece of information when making decisions (also called "insufficient adjustment").
Affect heuristic – basing a decision on an emotional reaction rather than a calculation of risks and benefits
Attentional Bias – the tendency of emotionally dominant stimuli in one's environment to preferentially draw and hold attention and to neglect relevant data when making judgements of a correlation or association.
Availability heuristic – estimating what is more likely by what is more available in memory, which is biased toward vivid, unusual, or emotionally charged examples.
Backfire effect – when people react to disconfirming evidence by strengthening their beliefs.
Clustering illusion – the tendency to under-expect runs, streaks or clusters in small samples of random data
Confirmation bias – the tendency to search for or interpret information in a way that confirms one's preconceptions
Conjunction fallacy – the tendency to assume that specific conditions are more probable than general ones
Regressive Bias – tendency to underestimate high values and high likelihoods/probabilities/frequencies and overestimate low ones. Based on the observed evidence, estimates are not extreme enough
Focalism - the tendency to rely too heavily, or "anchor," on a past reference or on one trait or piece of information when making decisions.
Forer effect - the observation that individuals will give high accuracy ratings to descriptions of their personality that supposedly are tailored specifically for them, but are in fact vague and general enough to apply to a wide range of people. This effect can provide a partial explanation for the widespread acceptance of some beliefs and practices, such as astrology, fortune telling, graphology, and some types of personality tests.
Frequency illusion – the illusion in which a word, a name or other thing that has recently come to one's attention suddenly appears "everywhere" with improbable frequency (see also recency illusion). Sometimes called "The Baader-Meinhof phenomenon".
Gambler's fallacy – the tendency to think that future probabilities are altered by past events, when in reality they are unchanged. Results from an erroneous conceptualization of the Law of large numbers. For example, "I've flipped heads with this coin five times consecutively, so the chance of tails coming out on the sixth flip is much greater than heads."
Hindsight bias – sometimes called the "I-knew-it-all-along" effect, the tendency to see past events as being predictable at the time those events happened.(sometimes phrased as "Hindsight is 20/20")
Hyperbolic discounting – the tendency for people to have a stronger preference for more immediate payoffs relative to later payoffs, where the tendency increases the closer to the present both payoffs are
Impact bias – the tendency to overestimate the length or the intensity of the impact of future feeling states.
Insensitivity to sample size – the tendency to under-expect variation in small samples
Irrational escalation – the phenomenon where people justify increased investment in a decision, based on the cumulative prior investment, despite new evidence suggesting that the decision was probably wrong.
Loss aversion – "the disutility of giving up an object is greater than the utility associated with acquiring it".
Negativity bias – the tendency to pay more attention and give more weight to negative than positive experiences or other kinds of information.
Neglect of probability – the tendency to completely disregard probability when making a decision under uncertainty.
Outcome bias – the tendency to judge a decision by its eventual outcome instead of based on the quality of the decision at the time it was made.
Pseudocertainty effect – the tendency to make risk-averse choices if the expected outcome is positive, but make risk-seeking choices to avoid negative outcomes
Recency bias – a cognitive bias that results from disproportionate salience of recent stimuli or observations – the tendency to weigh recent events more than earlier events (see also peak-end rule, recency effect).
Restraint bias – the tendency to overestimate one's ability to show restraint in the face of temptation.
Selective perception – the tendency for expectations to affect perception.
Selection bias - the distortion of a statistical analysis, resulting from the method of collecting samples. If the selection bias is not taken into account then certain conclusions drawn may be wrong.
Semmelweis reflex – the tendency to reject new evidence that contradicts a paradigm
Subjective validation – perception that something is true if a subject's belief demands it to be true. Also assigns perceived connections between coincidences.
Zero-risk bias – preference for reducing a small risk to zero over a greater reduction in a larger risk.
So you see, its much easier to blame the broker. But in reality, we are just hopeless at dealing with shit.
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So you see, its much easier to blame the broker. But in reality, we are just hopeless at dealing with shit.
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When you lost money in forex trading, do you lost to your broker or to some financial institution.
I ask this in order to understand forex very well. That question is given me a lot of headache. Your comment will be highly appreciated.
Thanks