【The Trading Edition】 Episode 23: Your order hasn’t reached the sea!? The sweet trap and brutal truth of "FX brokers" ??

Last time (Chapter 22), we talked about the heat of the “futures market” where farmers and Wall Street financiers mingle, and the fearsome leverage that can move vast sums with a tiny amount of capital. In a futures market fought under strict rules, you can lose funds in an instant if you neglect risk management.
Now, this time we finally cut into the world that is most popular among Japanese individual traders, and that everyone starts easily with a smartphone app: FX (foreign exchange margin trading).
To summarize: in this Chapter 8, Dr. Elder issues the strongest warning about FX.
Beyond the chart you see every day, who exactly is making profits and how? This time we will candidly reveal the “cruel underbelly of FX” that the financial industry hides. It might be a bit shocking, but it is a truth you must know to protect your valuable funds.
1. The World’s Largest Sea where $4 Trillion Moves per Day
First, the foreign exchange market itself is the world’s largest asset class. It trades around the clock from Sunday through Friday, and its daily trading volume exceeds $4 trillion (hundreds of trillions of yen). The majority of currency trading is not for risk hedging by importers/exporters, but for speculative trades aimed at price movements.
Up to this point, it sounds like a highly liquid and wonderful market. The problem is not the sea itself, but the route we access that sea (the interbank market).
2. The Biggest Enemy Is the FX Broker “In the Face of Your Ally”
When you trade stocks or futures, your securities company acts as your agent, routing orders to the market on your behalf. They profit by charging you trading fees.
However, the FX brokers that most beginners open accounts with are not your agents. They are your “enemies.”
Profit entirely opposed:Most FX brokers take the opposite side of your trades and hold positions. In other words, if you lose money on a trade, that money becomes the broker’s profit. Conversely, if you make money, the broker bears the loss with their own funds.
Orders never reach the sea (dealing) :Many FX brokers do not route your orders to the actual foreign exchange market (the interbank market). Instead, they keep them within their own internal systems (within the broker’s computers). This is called “over-the-counter” trading, where no real trades exist, and only electronic records are kept in the company’s books.

3. The Madness that “Customer Funds Are Our Funds from the Start”
The reason brokers don’t send your orders to external markets is very simple.
“Why should we share the spoils (funds) offered by the customer with others?”
This is their true sentiment. Because they are quite confident that customers will lose their funds, the money entrusted to FX brokers is treated from the outset as “theirs (money that will eventually become their profit).” In fact, many FX brokers pay commissions to employees who bring in customers based on that customer’s funds.
4. The Real Purpose of Enormous Leverage
So, how can you make customers lose their funds quickly and surely? The ultimate weapon is “abnormally high leverage.”
A trap that harvests in an instant:FX brokers offer lethal leverage, such as 100x and even 400x, to ensure customer losses (though there are regulatory limits in Japan today; offshore FX remains active).
Bankruptcy with a small adverse move:A beginner who only has $1,000 can suddenly hold a position worth $100,000. If the price moves even slightly unfavorably, the customer loses all funds, and the broker can collect profits with no risk.
In fact, senior officials at the U.S. CFTC (Commodity Futures Trading Commission) have said that currency trading has become the most widespread fraud today, and The Wall Street Journal reported that the average FX victim loses about $15,000.

5. Professional Solution: Move to a Fair Battlefield — Currency Futures
You may wonder, “So does that mean I have to give up currency trading?” Rest assured. The doctor presents a clear solution.