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Who's on the Other Side of Your Trade? How the Market Works

Before you place a single trade, it helps to know what actually happens when you click buy. Who you're trading with, what the broker does, why there are two prices, and what one gold trade looks like in dollars.

Written By

Karolina Hansen

Updated 26/10/2026 · 7 min read

GoldForex

Key Takeaways

With most retail brokers you're trading a contract (a CFD) with the broker, so you never own the gold itself.
There are always two prices. You buy at the higher one (the ask) and sell at the lower one (the bid). The gap is the spread.
Lot size decides how much each price move is worth to you. On gold, 0.01 lots is about $1 per $1 move.
Every trade starts slightly negative because of the spread, so price has to move in your favour just to get back to zero.

When you click buy on a trading platform, it feels like you've bought something. Usually you haven't. You've opened a contract that goes up or down in value as the price moves. Once that clicks, a lot of the confusing parts of trading start to make sense. So before charts, strategies or anything else, I want you to understand what's going on behind that button.

Who's on the Other Side

Every trade needs someone on the other side. If you buy, somebody has to sell to you. For most people starting out with gold or forex, that somebody is your broker. You open an account, deposit money, and trade contracts for difference (CFDs) with them. The contract pays you the difference between where you opened and where you closed. You never take delivery of a gold bar or a pile of euros.

You

Open and close trades and decide the size. Your profit or loss is the price change multiplied by your size.

Your broker

Gives you prices, the platform and the account. Takes the other side of your contract and earns from spreads, commissions and overnight fees.

The wider market

Banks and bigger firms that brokers get their prices from. Some brokers pass your trades on to them, some keep them in-house, many do a bit of both.

This is why choosing a broker matters so much. They're your counterparty, they hold your money and they set the costs you pay on every trade. Look for proper regulation before anything else.

Why There Are Two Prices

Look at gold on any platform and you'll see two numbers side by side, for example 4,000.00 and 4,000.30. The lower one is the bid. That's the price you can sell at. The higher one is the ask. That's the price you can buy at. The gap between them is the spread, and it's one of the main ways a broker gets paid.

Bid

The lower price

What you get when you sell
Where a buy trade is closed

Ask

The higher price

What you pay when you buy
Where a sell trade is closed

Spread

Ask minus bid

A cost you pay on every trade
Usually wider around news and quiet hours

Because you buy at the ask and sell at the bid, a trade is a little bit negative the moment you open it. If you bought at 4,000.30 and closed straight away, you'd close at the bid of 4,000.00 and lose the spread. Price has to move at least that far in your favour before you're back at zero.

What a Lot Is

A lot is the unit you trade in. On gold, one standard lot is 100 ounces. At 4,000 an ounce that's a $400,000 position, which is why brokers let you trade much smaller sizes and only ask for a deposit (called margin) to open one. The size you pick decides what every $1 move in gold is worth to you.

Lot size	Ounces of gold	Value of a $1 move
1.00 (standard)	100 oz	$100
0.10 (mini)	10 oz	$10
0.01 (micro)	1 oz	$1

What a $10 move in gold is worth at each lot size

0.01 lots$10

0.05 lots$50

0.10 lots$100

0.50 lots$500

1.00 lots$1,000

Illustrative example. Same price move, very different result. Contract sizes can vary by broker, so check yours.

Leverage means a small deposit controls a big position. It works the same way in both directions, so a move against you costs exactly as much as the same move in your favour would have paid.

One Gold Trade, in Dollars

Here's how that looks on one trade. Gold is quoted at 4,000.00 bid and 4,000.30 ask. You buy 0.10 lots, so each $1 move is worth $10 to you. You pay the ask, 4,000.30. To close, you'll sell at whatever the bid is at that time.

You buy 0.10 lots at 4,000.30

You're paying the ask. The bid is 4,000.00, so straight away you're showing about −$3. That's the spread.

Price moves

Every $1 the bid moves changes your result by $10, up or down.

If the bid reaches 4,010.00

You close at 4,010.00. That's 9.70 above your entry, so about +$97.

If the bid falls to 3,990.00

You close at 3,990.00. That's 10.30 below your entry, so about −$103.

Result of the example trade, 0.10 lots of gold

Closed straight away (spread only)−$3

Bid reaches 4,010+$97

Bid falls to 3,990−$103

Illustrative example. Ignores commission and overnight fees. Notice the $10 move up pays less than the $10 move down costs, because of the spread.

What to Take From This

I know my broker is the other side of my trade, and I've checked how it's regulated.
I can find the bid, the ask and the spread on my platform.
I know what a $1 move is worth at the lot size I'm using.
I understand that every trade starts slightly negative because of the spread.

None of this tells you when to buy or sell. It does stop you trading blind, though. If you know what each move is worth before you click, you'll make calmer decisions, and you won't get a nasty surprise from a lot size that was ten times bigger than you meant.

The common traps new gold traders fall into, and what to do about each one.

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Frequently Asked Questions

With most retail brokers, no. You're trading a CFD, a contract that pays the difference between your opening and closing price. Some providers do sell physical gold, but that's a different product.

Because you buy at the ask and the platform values your trade at the bid. The gap is the spread. Price has to move in your favour by at least the spread before you're back to zero.

There isn't one right answer, because it depends on your account and how far away your stop is. What matters is that you work out what a move is worth before you trade, so the possible loss is an amount you've decided you can accept.

Educational content only, not financial advice. Trading involves risk, and past performance does not guarantee future results.

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