How forex works: from the quote on your screen to the closed trade
One trade, step by step: where the price comes from, what each order type promises, what happens in the seconds after you click, and the three things that move while a position is open.
This page follows a single trade from the quote on your screen to the money settled in your account, and names what changes at each step. If you understand this sequence, most of what people call “the broker cheated me” turns out to be one of these steps behaving normally.
Where the price comes from
There is no single official price for a currency pair. Large banks quote prices to each other continuously, and that interbank layer produces something close to a reference price. Your broker takes prices from one or more liquidity providers, applies its own adjustment, and shows you the result.
This is why two brokers can show EUR/USD at slightly different levels at the same instant, and why a chart from one platform will never match another to the last decimal. Neither is wrong. There is no master copy.
The quote: two prices, always
You see two numbers, not one.
- Bid: what you can sell at.
- Ask: what you can buy at, always higher.
The gap is the spread. Most charts plot the bid, so a long position opens above the line you were looking at and closes on the line. That single fact explains a large share of “my stop was hunted” complaints.
The order types, and what each promises
| Order | Promises | Does not promise |
|---|---|---|
| Market | Execution | Price |
| Limit | Price, or better | Execution |
| Stop | Execution once triggered | Price |
That table is the whole of order theory. A stop loss is a stop order, so it guarantees you get out and guarantees nothing about where. In a fast market it fills worse than the level you set, which is called slippage and is not a malfunction.
What happens in the seconds after you click
- The platform sends the order with your requested price and your maximum acceptable deviation.
- The broker checks it: is the market open, is the volume within limits, is there enough margin, is the stop far enough from price to satisfy the minimum stop level.
- It routes the order, either to a liquidity provider or internally.
- It returns a fill at a price, or a rejection with a reason.
Rejections are where beginners lose hours. The usual causes are a stop placed closer than the broker’s minimum, a volume below the minimum or off the step, insufficient free margin, or the market being closed for that instrument even though the platform is open. Every one of those returns a specific error, and the error is in the platform’s log.
Requote, slippage and deviation
- Requote: the broker says the price moved and offers a new one. Common on instant execution accounts, rare on market execution.
- Slippage: you are filled at a different price than requested. It works both ways, though it is remembered only when negative.
- Deviation or max slippage: the setting where you say how much difference you will accept. Set it too tight and orders fail in fast markets; too loose and you accept bad fills. Automated systems expose this as an input, and it is one of the settings worth understanding before running one.
While the position is open
Three things move without you doing anything:
- Floating profit and loss changes your equity, not your balance.
- Swap, the overnight financing charge or credit for holding past the daily rollover, based on the interest rate difference between the two currencies. On Wednesday it is usually charged three times, to cover the weekend settlement. A strategy that holds for weeks can be quietly eroded, or occasionally paid, by swap alone.
- Margin requirements can change, notably before weekends and major events.
How it ends
A position closes in one of four ways: you close it, the stop loss triggers, the take profit triggers, or the broker closes it at the stop out level because equity fell too far. Only the last one is outside your control, and it is a consequence of position size, covered in margin.
When it closes, floating profit or loss becomes realised, the margin is released, and the balance finally moves.
What to read next
- What is forex: the market and the pair.
- Spread: the cost paid on every entry.
- Margin: what is frozen and when the broker intervenes.
- MetaTrader: where to read the order log and the symbol specification.
Frequently asked questions
Why do two brokers show different prices for the same pair?
There is no single official price. Each broker takes quotes from its own liquidity providers and applies its own adjustment, so prices differ slightly and charts never match to the last decimal. Neither is wrong; there is no master copy.
Does a stop loss guarantee my exit price?
No. A stop loss is a stop order, which guarantees execution once triggered but not the price. In a fast market it fills worse than the level you set. That is slippage, and it is normal rather than a malfunction.
Why was my order rejected?
The usual causes are a stop placed closer to price than the broker's minimum stop level, a volume below the minimum or off the volume step, insufficient free margin, or the instrument being closed even though the platform is open. Each returns a specific error, and the error is in the platform's log.
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