Is real (physical) money traded during online trading?
"With Forex trading - physical currency is not involved. You're playing with the live exchange rates, and it is not designed for purchasing/selling physical currency. Most Forex trading is based on leveraging, thus you're not only buying money that you're not going to physically receive - you're also paying with money that you do not physically have. The ""investment"" is in fact a speculation, and is akin to gambling, which, if I remember correctly, is strictly forbidden under the Islam rules. That said, the positions you have - are yours, and technically you can demand the physical currency to be delivered to you. No broker will allow online trading on these conditions, though, similarly to the stocks - almost no broker allows using physical certificates for stocks trading anymore." When you buy a currency via FX market, really you are just exchanging one country's currency for another. So if it is permitted to hold one currency electronically, surely it must be permitted to hold a different country's currency electronically. I asked a followup question on the Islam site. The issue with Islam seems to be that exchanging money for other money is 'riba' (roughly speaking usury). There are different opinions, but it seems that in general exchanging money for 'something else' is fine, but exchanging money for other money is forbidden. The physicality of either the things or the money is not relevant (though again, opinions may differ). It's allowed to buy a piece of software for download, even though nothing physical is ever bought. Speculating on currency is therefore forbidden, and that's true whether or not a pile of banknotes gets moved around at any point. But that's my interpretation of what was said on the Islam site. I'm sure they would answer more detailed questions. "This is somewhat of a non-answer but I'm not sure you'll ever find a satisfying answer to this question, because the premises on which the question is based on are flawed.  Money itself does not ""exist physically,"" at least not in the same sense that a product you buy does. It simply does not make sense to say that you ""physically own money."" You can build a product out of atoms, but you cannot build a money out of atoms. If you could, then you could print your own money. Actually, you can try to print your own money, but nobody would knowingly accept it and thus is it functionally nonequivalent to real money. The paper has no intrinsic value. Its value is derived from the fact that other people perceive it as valuable and nowhere else. Ergo paper money is no different than electronic money. It is for this reason that, if I were you, I would be okay with online Forex trading." "I think you need to define what you mean by ""buy currency online using some online forex trading platform"" ... In large Fx trades, real money [you mean actual electronic money, as there is not paper that travels these days]...   The Fx market is quite wide with all kinds of trades. There are quite a few Fx transactions that are meant for delivery. You have to pay in the currency for full amount and you get the funds electronicall credited to you in other currency [ofcouse you have an account in the other currency or you have an obligation to pay]. This type of transaction is valid in Ismalic Banking. The practise of derivaties based on this or forward contracts on this is not allowed." "This is my two cents (pun intended).  It was too long for a comment, so I tried to make it more of an answer.  I am no expert with investments or Islam: Anything on a server exists 'physically'.  It exists on a hard drive, tape drive, and/or a combination thereof.  It is stored as data, which on a hard drive are small particles that are electrically charged, where each bit is represented by that electric charge.  That data exists physically.  It also depends on your definition of physically.  This data is stored on a hard drive, which I deem physical, though is transferred via electric pulses often via fiber cable.  Don't fall for marketing words like cloud.  Data must be stored somewhere, and is often redundant and backed up. To me, money is just paper with an amount attached to it.  It tells me nothing about its value in a market.  A $1 bill was worth a lot more 3 decades ago (you could buy more goods because it had a higher value) than it is today.  Money is simply an indication of the value of a good you traded at the time you traded.  At a simplistic level, you could accomplish the same thing with a friend, saying ""If you buy lunch today, I'll buy lunch next time"".  There was no exchange in money between me and you, but there was an exchange in the value of the lunch, if that makes sense.  The same thing could have been accomplished by me and you exchanging half the lunch costs in physical money (or credit/debit card or check). Any type of investment can be considered gambling.  Though you do get some sort of proof that the investment exists somewhere  Investments may go up or down in value at any given time.  Perhaps with enough research you can make educated investments, but that just makes it a smaller gamble.  Nothing is guaranteed.  Currency investment is akin to stock market investment, in that it may go up or down in value, in comparison to other currencies; though it doesn't make you an owner of the money's issuer, generally, it's similar.  I find if you keep all your money in U.S. dollars without considering other nations, that's a sort of ignorant way of gambling, you're betting your money will lose value less slowly than if you had it elsewhere or in multiple places. Back on track to your question: [A]m I really buying that currency?  You are trading a currency.  You are giving one currency and exchanging it for another.  I guess you could consider that buying, since you can consider trading currency for a piece of software as buying something. Or is the situation more like playing with the live rates? It depends on your perception of playing with the live rates.  Investments to me are long-term commitments with reputable research attached to it that I intend to keep, through highs and lows, unless something triggers me to change my investment elsewhere.  If by playing you mean risk, as described above, you will have a level of risk.  If by playing you mean not taking it seriously, then do thorough research before investing and don't be trading every few seconds for minor returns, trying to make major returns out of minor returns (my opinion), or doing anything based on a whim. Was that money created out of thin air? I suggest you do more research before starting to trade currency into how markets and trading works.  Simplistically, think of a market as a closed system with other markets, such as UK market, French market, etc.  Each can interact with each other.  The U.S. [or any market] has a set number of dollars in the pool.  $100 for example's sake.  Each $1 has a certain value associated with it.  If for some reason, the country decides to create more paper that is green, says $1, and stamps presidents on them (money), and adds 15 $1 to the pool (making it $115), each one of these dollars' value goes down.  This can also happen with goods.  This, along with the trading of goods between markets, peoples' attachment of value to goods of the market, and peoples' perception of the market, is what fluctates currency trading, in simple terms.  So essentially, no, money is not made out of thin air.  Money is a medium for value  though values are always changing and money is a static amount. You are attempting to trade values and own the medium that has the most value, if that makes sense.  Values of goods are constantly changing. This is a learning process for me as well so I hope this helps answers your questions you seem to have.  As stated above, I'm no expert; I'm actually quite new to this, so I probably missed a few things here and there."
I trade futures. No FX or equities though. It is my only source of income, and has been for about 5 years now.   Equities and FX, to me, seems like more of a gamble than Vegas. I don't know how people do it. Yes, you will need to create an actual account. However, when all is done and you are about to log in, there will be an option on whether you want to log in as a live trader or a paper trader. Select the paper trading option and log in and get rich off fake money. I don't understand what your contention with Katsuyama is exactly. Are you saying that Lewis' Flash Boys was a work of fiction?  Electronic trading is more efficient, cheaper, democratic, etc than paper orders, for sure. But many HFT firms have built billion dollar enterprises by scalping ordinary investors, fractions of pennies at a time, without adding anything of value. The former truth does not invalidate the latter one. Stock trades are always between real buyers and real sellers. In thinly-traded small stocks, for example, you may not always be able to find a buyer when you want to sell. For most public companies, there is enough volume that individual investors can just about always fill their market orders. "There are gold index funds. I'm not sure what you mean by ""real gold"". If you mean you want to buy physical gold, you don't need to. The gold index funds will track the price of gold and will keep you from filling your basement up with gold bars. Gold index funds will buy gold and then issue shares for the gold they hold. You can then buy and sell these just like you would buy and sell any share. GLD and IAU are the ticker symbols of some of these funds. I think it is also worth pointing out that historically gold has a been a poor investment." "The only ""authoritative document"" issued by the IRS to date relating to Cryptocurrencies is Notice 2014-21. It has this to say as the first Q&A: Q-1: How is virtual currency treated for federal tax purposes?   A-1: For federal tax purposes, virtual currency is treated as property. General tax principles applicable to property transactions apply to transactions using virtual currency. That is to say, it should be treated as property like any other asset. Basis reporting the same as any other property would apply, as described in IRS documentation like Publication 550, Investment Income and Expenses and Publication 551, Basis of Assets. You should be able to use the same basis tracking method as you would use for any other capital asset like stocks or bonds. Per Publication 550 ""How To Figure Gain or Loss"", You figure gain or loss on a sale or trade of property by comparing the amount you realize with the adjusted basis of the property. Gain. If the amount you realize from a sale or trade is more than the adjusted basis of the property you transfer, the difference is a gain. Loss. If the adjusted basis of the property you transfer is more than the amount you realize, the difference is a loss.  That is, the assumption with property is that you would be using specific identification. There are specific rules for mutual funds to allow for using average cost or defaulting to FIFO, but for general ""property"", including individual stocks and bonds, there is just Specific Identification or FIFO (and FIFO is just making an assumption about what you're choosing to sell first in the absence of any further information). You don't need to track exactly ""which Bitcoin"" was sold in terms of exactly how the transactions are on the Bitcoin ledger, it's just that you bought x bitcoins on date d, and when you sell a lot of up to x bitcoins you specify in your own records that the sale was of those specific bitcoins that you bought on date d and report it on your tax forms accordingly and keep track of how much of that lot is remaining. It works just like with stocks, where once you buy a share of XYZ Corp on one date and two shares on another date, you don't need to track the movement of stock certificates and ensure that you sell that exact certificate, you just identify which purchase lot is being sold at the time of sale." If the company has a direct reinvestment plan or DRIP that they operate in house or contract out to a financial company to administer, yes. There can still be transaction fees, and none of these I know of offer real time trading.  Your trade price will typically be defined in the plan as the opening or closing price on the trade date.  Sometimes these plans offer odd lot sales at a recent running average price which could provide a hundred dollar or so arbitrage opportunity. I mean there is always the possibility that occurs, but I think it is extremely unlikely. The network effect is extremely important in technology and even more so with money given liquidity. Bitcoin is the protocol (TCP/IP). Many of the blockchains that people are referencing are just another form of a database and they are not permisonless. It is the equivalent of the Internet versus an intranet. "Paying in physical cash is almost never a good idea for large purchases (unless you like being audited and/or having lots of attention from law enforcement).  All purchases over $10k in cash need to have special forms filled out for the IRS and Financial Crimes Enforcement Network, so this is not a tinfoil hat conspiracy theory... if you do that on the regular, you ARE being investigated.  When people say ""cash"" for normal purchases, they generally mean a wire transfer (e.g. buying a house ""cash"" = wire transfer between banks).  In this case, purchasing a company ""cash"" is contrasted with purchasing with stock.  So instead of getting $13.7B of AMZN, Amazon takes out a loan (or pulls their money from cash on on hand) and transfers it to the financial institution handling the sale.  Everyone who owns WFM stock gets paid out in cash, as opposed to receiving some number of shares of AMZN." There is normally a policy at the organisation that would restrict trades or allow trades under certain conditions. This would be in accordance with the current regulations as well as Institutions own ethical standards.  Typical I have seen is that Technology roles are to extent not considered sensitive, ie the employees in this job function normally do not access sensitive data [unless your role is analyst or production support]. An employee in exempt roles are allowed to trade in securities directly with other broker or invest in broad based Mutual Funds or engage a portfolio management services from a reputed organisation. It is irrelevant that your company only deals with amounts > 1 Million, infact if you were to know what stock the one million is going into, you may buy it slightly earlier and when the company places the large order, the stock  typically moves upwards slightly, enough for you to make some good money. That is Not allowed. But its best you get hold of a document that would layout the do' and don't in your organisation. All such organisation are mandated to have a written policy in this regard. In short, thanks to the answers and comments posted so far.  No actual money is magically disappeared when the stock price goes down but the value is lost. The value changes of a stock is similar to the value changes of a house. The following is the long answer I came up with based on the previous answers and comments alone with my own understandings. Any experts who find any of the following is 200% out of place and wrong, feel free to edit it or make comments. Everything below only applies if the following are true: The stock price is only decreasing since the IPO because the company has been spending the money but not making profits after the IPO. The devaluation of the stock is not the result of any bad news related to the company but a direct translation of the money the company has lost by spending on whatever the company is doing. The actual money don’t just disappear into the thin air when the stock price goes down. All the money involved in trading this stock has already distributed to the sellers of this stock before the price went down.  There is no actual money that is literally disappeared, it was shifted from one hand to another, but again this already happened before the price went down.   For example, I bought some stocks for $100, then the price went down to $80. The $100 has already shifted from my hand to the seller before the price went down. I got the stock with less value, but the actual money $100 did not just go down to $80, it’s in the hand of the seller who sold the stock to me.  Now if I sell the stock to the same seller who sold the stock to me, then I lost $20, where did the $20 go? it went to the seller who sold the stock to me and then bought it back at a lower price. The seller ended up with the same amount of the stocks and the $20 from me. Did the seller made $20? Yes, but did the seller’s total assets increased? No, it’s still $100, $80 from the stocks, and $20 in cash. Did anyone made an extra $20? No. Although I did lost $20, but the total cash involved is still there, I have the $80 , the seller who sold the stock to me and then bought it back has the $20. The total cash value is still $100. Directly, I did lost $20 to the guy who sold me the stock when the stock has higher value and then bought it back at a lower price. But that guy did not increased his total assets by $20. The value of the stock is decreased, the total money $100 did not disappear, it ended up from one person holding it to 2 people holding it. I lost $20 and nobody gained $20, how is that possible? Assume the company of the stock never made any profit since it’s IPO, the company just keeps spending the money, to really track down where the $20 I lost is going, it is the company has indirectly spent that money. So who got that $20 I lost? It could be the company spent $20 for a birthday cake, the $20 went to the cake maker. The company never did anything to make that $20 back, so that $20 is lost. Again, assume the stock price only goes down after  its IPO, then buying this stock is similar to the buying a sport car example from JoeTaxpayer (in one of the answers), and buying an apple example from BrenBarn(in one of the comments from JoeTaxpayer’s answer).  Go back to the question, does the money disappears into the thin air when the value of the stock goes down? No, the money did not disappear, it switched hands. It went from the buyer of the stock to the company, and the company has spent that money. Then what happens when the stock price goes down because bad news about the company? I believe the actual money still did not just disappear. If the bad news turn out to be true that the company had indeed lost this much money, the money did not disappear, it’s been spent/lost by the company. If the bad news turn out to be false, the stock price will eventually go up again, the money is still in the hand of the company. As a summary, the money itself did not disappear no matter what happens, it just went from one wallet to another wallet in many different ways through the things people created that has a value. "Many online brokers have a ""virtual"" or ""paper"" trading feature to them.  You can make trades in near-real time with a fake account balance and it will treat it as though you were making the trade at that time.  No need to manage the math yourself - plus, you can even do more complicated trades (One-Cancels-Other/One-Triggers-Other)." Sure they can (most publicly traded banks at least) - and they do it a lot. Many banks have a proprietary trading desk, or Prop desk, where traders are buying and selling shares of publicly traded companies on behalf of the bank, with the bank's own money. This is as opposed to regular trading desks where the banks trade on behalf of their customers. I can make withdrawals immediately, 2x per month. I wasn't told the money would be tied up. And also, although it doesn't count for much, I'd like to trade under a formal prop firm just so I could put it on my resume, people wouldn't put much weight on performance in a retail account. Atleast, I don't believe so, I could be wrong Obviously, you should not buy stock when the option is to pay down your debt. However, your question is different. Should you sell to reduce debt. That really depends on your personal situation. If you were planning to sell the stock anyway, go ahead and reduce your loans. Check out how the stock is doing and what the perspectives are. If the stock looks like it's going down, sell... Do you have savings? Unless you do, I should advise to sell the stock at any rate. If you do have savings, are they earning you more (in percentage) than your loans? If they are, keep them...