What Happens in a FOREX Transaction

Discussion in 'Forex Trading' started by dbj, May 29, 2010.

  1. dbj


    Greetings All - I'm brand new to FOREX. I've perused a lot of intro material to get my bearings, yet have some fundamental questions about how things work.

    Starting with: When you make a retail FOREX trade, what actually happens behind the scenes? I understand completely the concept that a trade involves the simultaneous purchase of one currency and sale of another. But from what I can tell this doesn't really happen with a retail FOREX trade. No currency is actually bought or sold. Rather, the trader purchases a 'position'-- an exchange rate between two currencies -- that is effectively a wager on what will happen in the 'real' FOREX market....

    So if there is no exchange of currencies with a FOREX transaction, what actually does happen?

    Any illumination on this will be greatly appreciated.

    David in California