A forex broker refers to an entity that seeks to connect the retail forex trader with the forex market. Most of the trade in the forex market takes place on the "interbank" level which is another way of referring to trading within banks electronically at various prices which may differ from bank to bank.
A forex trading account simply put, is something which functions like a bank account and it gives you the ability to purchase currencies and also hold them. Transaction in these currencies occurs in pairs. For instance, when you purchase EUR/USD, you are holding for the US dollars to lose value in terms of worth over the Euro at a given point in time. The Euro ought to have more value or worth than the dollars if you really want to make some profits.
The primary duty of a forex broker is to offer you a way of getting into the mix with the banking network and to be able to purchase these currency pairs and hold them in a manner that is both convenient and easy. Before the advent of Forex brokers, a lot of people who wanted to engage in the purchase of currencies will have to go through a special relationship with the bank.
Forex brokers serve as middlemen between the trader and the market and hence, fore brokers are needed in large quantities. Forex brokers get their monies by taking a slice of the pie when you decide to make a trade.
The need for a forex broker usually arises when you want to change two currencies in a pair, usually measured in pips. When this trade is carried out, the forex broker charges a few pip before actually putting your trade on the market.
The need for a forex broker also arises when you want to close your trade, the forex broker will collect the profit between the "market price" and your own price. This is referred to as a spread.
Before you can correctly transact a business in the forex market, you need a forex broker since they are the middlemen through which currency pairs are traded. Searching for a forex broker is not something that requires special skills. All you need to do is to check a brokers list and open a demo account with anyone that suits your need.
If you are a novice in the forex market, then you will need an expert advice from the brokers on how well to trade and take advantage of the market and you can also get a forex trading education and learn about the usefulness of a forex broker. As long as you have the right broker, forex trading is not a hard task.
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.