In the previous lesson, you learned that retail forex traders do NOT trade in the “real” FX market.

If that’s the case, then WHERE are you actually trading? When you click “Buy” or “Sell” on your forex broker’s trading platform, where do your orders go?

That’s what we’ll reveal in this lesson.

In order to understand where your trades go, we first need to understand where retail forex brokers and traders (like yourself) fit within the FX market ecosystem.

The FX market is fragmented and complex but we’ll try and provide a simplified and stylized overview.

Retail Forex Traders Lake Example

Let’s pretend there is a giant body of water…a gigantic lake.

A lake that’s bigger than an ocean.

The biggest lake ever.


Let’s say this giant lake represents the “FX market”.


This giant lake is not empty.

Add Boats to the Lake

It contains boats!


The boats come in different sizes.

These boats represent the market participants in the FX market.

Imagine there are thousands of these boats in the water.

These market participants tend to be banks, non-bank financial institutions (“NBFIs”), multinational corporations (“MNCs”), large institutional investors, algorithmic trading firms such high-frequency trading (“HFTs”) and electronic market makers,  hedge funds, and high-net-worth individuals (“HNWIs”).

Some are huge. Some are less huge.

The Big Boats

The huge boats are the large commercial banks. Banks like Barclays, Citigroup, Deutsche Bank, HSBC, JP Morgan Chase, and UBS. Their boats are huge since they have a lot of capital.

The big boats sometimes trade directly with each other. This is known as a “bilateral trade”. So you can say that two boats can “trade bilaterally”.

When these big boats trade bilaterally, only the two market participants involved know what the quotes given were and the actual price that was agreed upon. Other market participants (boats) do not have access to this information at all.

Banks provide different quotes to different customers and agreed-upon prices and volumes are often never publicly disclosed. That makes it harder for any market participant to know if their trade was at a good (or bad) price.


But there aren’t only boats on this giant lake.

There are lots of islands!


These islands represent the different trading venues in the FX market.