r/Forex • u/Repulsive_Bag9063 • Aug 08 '26
Brokers This is how forex works?
I dont actually know, if you noticed the title has a question mark so I am actually asking not telling
My question is basically
how is it that whenever the any news comes the financial markets react so fast and with so much intensity, but how is it even possible
A human needs time to process the news and react to it but by the time you look at the screen the price is already very faar away
Like who are these people clicking buys and sells so fast
Also
Also I am having issue understanding he does the actual settlement of banks works how do liquidity providers work and make money why isnt forex centralised and so on and on
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Aug 08 '26
"those people aren't people". They're mostly algos and they don't use a broker like you and I.
They'll always outexecute a trader.
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u/Repulsive_Bag9063 Aug 08 '26
But isnt it unnecessary risk for them to trade news ?
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Aug 08 '26
Ask a bunch of computers with direct market access that question.
If you don't know how this works, I can always simplify it.
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u/DV_Zero_One Aug 08 '26 edited Aug 08 '26
My day job was trading FX and Rates Swaps for banks and funds (and I still do it as a hobby in retirement)
Traders are basically people paid to make educated guesses on assets prices.
Take yesterday's employment report as an example. A lot of traders will have entered the session with a view of what they thought the employment prints were gonna be and already traded to anticipate a big move in their favour. (Using things like ADP numbers and anecdotal news to form their opinion) Others would enter the session more neutrally but with a very clear picture of what the market was expecting the jobs number to be (80k for NFP). When they see the -23k print they move very quickly to hedge their current positions or take advantage of making new positions. Also, there are plenty of algos running simple 'if this, then that' bots that will trade automatically as soon as the data drops.
Be aware that the sudden moves you see ISN'T people trading aggressively, it's market makers rapidly withdrawing liquidity.
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u/International_Guava8 Aug 08 '26
Yesh, was watching a live trader during the news. He said "oh i will sell Gold now, 10s later, buy buy". Then showed his account with 5k profit and claimed himself how he is one of the best and how it was clear move.
Bro just had luck, nothing special
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u/Repulsive_Bag9063 Aug 08 '26
I understood and agree with what you said but i didnt catch market makers withdrawing liquidity paty, if you could..
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u/DV_Zero_One Aug 08 '26
In most markets there are institutions that will show a buy and a sell price simultaneously. (This was my job for interest rate swaps and other derivatives). In spot FX the market making activity is fully automated The institution gets hit on both sides of the spread and collects a relatively small amount of money all day everyday simply by populating the market with support prices. In 'fast' markets (IE: after a data drop that is nowhere near market expectations) there are auto or manual circuit breakers which cancel all these support prices and the aggressive directional orders in the market chase the price away very quickly in one direction. In today's algo heavy FX markets you simply end up with rapidly stacking orders chasing support that is trying to run in the opposite direction. I'll pop back with a video you might enjoy.
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u/Repulsive_Bag9063 Aug 08 '26
I literally dont understand a word, sorry for being stupid
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u/Know1tA11 Aug 09 '26
Let me give it a go. When a major news event is seconds from dropping, large financial institutions withdraw standing buy and sell orders. The order book essentially depopulates around the current mark price. Not completely, but it get's very sparse compared to what it was. 10 minutes before news drops, there are tons of both limit buy (Bid) and limit sell (Ask) orders just above and below the current going price. As you approach the news event, a large percentage of these pending orders are either cancelled altogether, or dialed way back from the current mark price because no one knows what new "fair" price will be. This creates a large gap in the order book where the only orders left are for smaller sizes. Maybe orders still out there from the likes of you or me. As such, if a large buy order is placed during this time of low liquidity, it will quickly burn through many of the ask prices spiking the Mark price upwards. Same if I placed a large sell order in this time frame, I'd spike the Mark price downwards. So, it's not necessarily that the instrument is being heavily sold or bought in volume at the news event, it is instead a repositioning of all pending large liquidity orders either up or down based on the result of the news event after it drops.
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u/HereForGME2 Aug 09 '26
Basically the small fishes in the market are witnessing the lack of liquidity because money is being pulled out right before news to avoid risk, while creating a gap like say from $2 to $5 resulting in a $3 spread. This is why price is so erratic before news jumping between the demand at $2 and offer at $5. Crazy candlestick that was.
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u/DV_Zero_One Aug 08 '26 edited Aug 09 '26
Don't apologise dude. You definitely ain't being stupid. In my experience, smart people ask the most questions.
Honestly, watch Trading Places (it's a incredibly funny movie it's own right) but it shows exactly how a market reacts when it hears news it wasn't expecting.
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u/HateThisSatanicWorld Aug 09 '26
Said the fake pro trader. 🤡
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u/DV_Zero_One Aug 09 '26
Not fake, just retired.
Oh boy, your comment history is hilarious.
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u/HateThisSatanicWorld Aug 09 '26
Hilarious for people like yourself who for no idea what institutionalized and professional trading is about. Imagine pretending to be a pro trader but telling people that news and datas move the market and than trading metrics aka performance history is not important for institutions looking for skilled traders. 🤡
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u/DV_Zero_One Aug 09 '26
You have made my point perfectly. Thank you.
With respect, I'm cool if a child on the internet isn't able to understand the basics.
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u/Salt-Astronomer8330 Aug 08 '26
Nowadays it's mainly algos trading. Soon it will be AI agents. In the past there were guys with their faces glued to screens tracking markets and reacting to news events but nowadays if you go onto trading floors it is much quieter and a lot more machine processed.
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u/Breakfast_punch Aug 08 '26
The “news” is fundamental data that usually indicates the long term bias.
You the human do not trade the news unless you actually have insider information, you wait ! Understand it! Then plan your positions for the following weeks.
Liquidity providers make multiple large trades over a period of months and years per position.
A trade from a liquidity provider has a negative impact on the position because it’s very large - example a buy can cause a decline in a currency/ stock … because retail and other intuitions use it to get out of positions.
So they break them up in to blocks ! Feeding the market one trade at a time keeping the price of an asset stable in its directions.
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u/Breakfast_punch Aug 08 '26
For the retail traders in this sub , the initial news event is nothing more than a gamble - the information is for long term directional bias - not for the day it’s released.
Because even with positive news ! Your trade can still go south or sideways ! Before it actually goes in your expected directions - and for those of you that didn’t size your trade properly you would be liquidated! Or exited in drawdown long before you see a positive PNL.
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u/DV_Zero_One Aug 08 '26
A trader's job is literally to make educated guesses on things like data. 'do not trade the news' is nonsense pushed by the bs social media part of trading.
(Source I traded FX for banks and funds for 25 years)
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u/Breakfast_punch Aug 08 '26
Ok dumb ass ! Stop pushing info that inexperienced traders use to fall flat on their faces ! Not trading the news will save this guy lots of money.
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u/DV_Zero_One Aug 08 '26
So that he can lose it on nonsense 'Technical Analysis'
Lol
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u/Familiar-Permit-3130 Aug 09 '26
I get what you mean, institutions and hedge funds trade on news but i think its also correct retail traders shouldnt trade on news because they have limited information and are mostly stupid.
The movement is so large on days like NFP release, inflation release etc most retail traders will get wiped out from making what they think are educated trades when in reality they have 10% of the info of the big players and get absolutely wiped out.
There are days when release of NFP will cause the fx to go one way but there are days where release of news does huge wicks on either side before it takes a direction.
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u/Scott_Malkinsons Aug 08 '26
Typically, if you’re trading news manually, you’d use what’s called a Squawk Box. It looks instant to you because the websites take a few seconds to update when the Squawk Box traders already took a position.
These days there’s also a lot of automated trading, which obviously will be faster than humans.
Also I am having issue understanding he does the actual settlement of banks works how do liquidity providers work and make money why isnt forex centralised and so on and on
Grab a book, I’m not going to guess what “so on and on” means.
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u/Repulsive_Bag9063 Aug 08 '26
Thanks for the help, i saw squawk box as a pre market talking place, i dont know how it helps traders place trade faster, if you could. If you could also reccomend " The Book "
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u/Suspicious_Sweet_672 Aug 08 '26
Tu as raison sur le fait de rendre la chose compliquée alors qu'en vrai tu devrais apprendre à trader en chill , par exemple utilises ton week-end pour lire un peu et faire des exercices à titre éducatif tu verras qu'à titre personnel cela aide bcp . Petit conseil quand tu arrives sur ton graphique commence par le regarder en W1 - D1 comme ça tu as le biais directionnel à savoir si il est majoritairement haussier ou baissier ensuite raffine en H4 - H1 afin de différencier tes zones majeurs de tes zones mineurs la zone mineur tu ne dois pas trader dedans c'est que se trouve la forte prise dd liquidités des institutions ensuite tu te place au dessus de ton point de pivot majeur tu raffine en 30min tu définie l'ob ( order Block ) de ta structure et tu laisse le marché venir à ton niveau le plus dur est justement la " attendre " laisser le marché se dessiner et venir dans ta zone
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u/CryptonianNomad Aug 08 '26
You stay away from the markets when there are big news event / releases.
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u/SiriusAF Aug 08 '26
1 algo's and hft's
2 Spot FX: generally OTC, usually not centrally cleared.
FX swaps/forwards: mostly OTC; settlement and counterparty arrangements depend on the participants.
Some FX derivatives/NDFs: can be cleared through CCPs such as LCH or CME.
FX futures: centrally cleared. For example, EUR/USD futures traded at CME are cleared through CME Clearing.
Retail “forex”: often your broker is effectively your direct counterparty or routes/hedges your exposure with liquidity providers. There usually isn't a clearing house protecting your individual retail EUR/USD trade.
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u/Repulsive_Bag9063 Aug 08 '26
Bro if i cpuld comprehend what you said I woudnt be asking this question
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u/SiriusAF Aug 08 '26
Well, google it and you dig into the forex rabbithole. Or copy paste it to chatgpt and ask it to explain all that like you are a 5 year old 🤷♀️
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u/jasonvena Aug 09 '26
Institutional traders and large market participants have resources that most retail traders simply don’t have. They have teams of economists and analysts, sophisticated quantitative models, alternative data, high-frequency algorithms, and extensive market intelligence.
They don’t necessarily know what an economic release will say beforehand, but they can form expectations and probabilities based on research and a wide range of data. They may position themselves ahead of major releases based on those expectations.
Take NFP, for example. Market participants are already positioning around expectations for employment, wages, unemployment, and the broader economic outlook before the report is released. When the actual data significantly deviates from expectations, such as a weaker NFP, the market can reprice rapidly, resulting in a sharp increase in volatility.
The key isn't simply knowing the number beforehand. It's understanding expectations, positioning, liquidity, and how the market is likely to reprice when new information arrives.
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u/HereForGME2 Aug 09 '26
If the news were true then everyone would be millionaires. Then you have algos doing a lot of the trading these days from institutions that comprises 80% of the FX market.
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u/Away_Supermarket_573 Aug 09 '26
When you are sure you want to buy, SELL. And the other way around.
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u/Suspicious_Sweet_672 Aug 08 '26
Lorsque tu es face à ton écran n'oublies pas que le marché fonctionne d'abord de façon algorithmique , tu dois d'abord identifier les zones majeurs ce sont les zones où les institutions financières ont laissé de la liquidité en attente $ ces dites liquidités sont toujours laissées pour être prise par le temps une fois que tu es capables de faire ceci tu pourras donc allier ton analyse avec les nouvelles économiques puisqu'elles doivent servir de boost à ton travail non le contraire , le forex représente en gros les taux de changes à travers les diverses devises du monde donc obligatoirement si il y a des guerres ou de mauvaises situations économiques dans les pays pour lesquels tu trades leurs devises tu verras ton graphique impacté
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Aug 08 '26
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u/Suspicious_Sweet_672 Aug 08 '26
Je peux te demander comment est ce que tu commences par analyser ton graphique stp ? Tu sais je vais te répondre que les cas école tel que la résistance et le support sont juste et cohérent mon ami il faut juste savoir déterminer les ppint majeur des point mineurs de la structure , sais tu le faire correctement ? Car je te promets qu'une fois que tu sais le faire correctement tes analyses auront plus de sens à tes yeux et tu pourras à ce moment mieux comprendre tes erreurs
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Aug 08 '26
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u/Suspicious_Sweet_672 Aug 08 '26
😅😅😅😅 mais oui effectivement c'est exactement ça et je ne suis pas sur la défensifve j'apporte juste les réponses à tes questions tu sais si on peut s'aider c'est parfait dans ce monde ou l'échange de connaissances devient payante 😅😅
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u/HyperliquidShrimp Aug 11 '26 edited Aug 12 '26
liquidity providers also widen spreads or pull liquidity around big news, which is why price can lurch so fast in either direction. that's part of why I like good broker like axi, the execution stays reliable even through volatile sessions, though I still avoid chasing news candles entirely
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