Who Makes Money in Forex Trading – Part 1

This is one of the most important questions to ask. Who makes money in Forex trading. What is for sure, retail traders don’t. This two-part article aims to answer this question as accurately as possible.

At least, not from the start. Statistically, most of them fail. Almost all of them.

Over ninety percent of Forex retail traders lose their deposit in the first six months. There are plenty of reasons for that.

Firstly, they come to the trading arena having unrealistic expectations. They want to make a million bucks starting with one thousand. And, they want to do it overnight.

Secondly, they don’t know what they’re doing. They’re not educated. As such, they treat Forex trading as a hobby. We all know having a hobby is expensive…

Finally, instead of learning from their pitfalls, they put more money into the trading game. However, this is not a game. This is the cruelest arena in the world. No one feels sorry when winning. So, no one should feel bad when losing. After all, everyone knows the risk. Right?

But then, who makes money in Forex?

Who Makes a Profit?

The Forex market is the most liquid market in the world. The daily turnover is in trillions of dollars.

Because the way our financial system works, everything is related. And, integrated.

A currency pair moves for various reasons. Some currency pairs free-float. It means they move based on the imbalances between supply and demand. Some are controlled.

Despite all difficulties, some parties do make money. How come? And, how much?

Forex Brokers

To be fair, I’m referring here only on some brokers. The point of this article is not to consider brokers’ commissions and other fees.

But, if brokers as traders make money. Well, they do.

In fact, brokers that function as market makers or a hybrid between STP (Straight Through Protocol) and market maker, make money. They have special trading departments.

Forex brokers know retail traders have little chances to survive. As such, they base their trading on this statistic.

Literally, they take the other side of their clients’ trades. Between incomes from commissions and spreads, trading the opposite way is more profitable.

Who doesn’t want to be on the same side of a trade that has 90% chances to win?

Central Banks

Central banks function as independent entities. Some of them, though, are private.

The perfect example comes from Switzerland. The Swiss National Bank (SNB) is a private entity. Its shares are even listed on the stock exchange.

Parts of the profits made by any central bank comes from Forex trading. Not all of them.

Monetary policy implementation doesn’t mean buying or selling currencies. Or, not only.

It means making sure the financial system has enough liquidity, the banking system functions properly, and inflation stays under normal limits.

In this process, central banks make a profit. In any case, they have more chances to do that. They have bigger capital, know the monetary policy in advance, and can afford a draw-down here and there.

These are the most important entities that make it in the Forex market. But, not the only ones. Find out who else profits in Forex trading.




Trade with the market leader now:

eToro is one of the most popular brokers and has an excellent customers service. You can start with only $100 minimum deposit and trade the Forex market, commodities and plenty of indices.

>> Start trading at eToro today! <<

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.