This is one of the questions new traders will ask on getting to know about the forex market. it is really important that traders and intending traders understand who a forex broker is and what role they play in the forex market as it is as important as trading the forex market. If you, as a forex trader, get a good forex broker, you will stand better chances to be successful in the forex market compared to someone trading through the wrong forex broker.
WHO IS A FOREX BROKER?
A forex broker is the middleman between a forex trader and the forex market. They are the ones that process every order a trader makes in the forex market. To answer a very popular question; yes, retail forex traders do not have direct access to the forex market. How it actually works is that a trader opens a forex trading account, funds it, and gets access to trade currencies with other forex traders through the trading platform; or rather, that is what it seems like. The actual deal is that once a trader funds his or her trading account and starts making orders on what pair to buy or sell, the brokers are focused of vetting every one of those orders.
Why will brokers vet a trader’s order before it is executed? It is not strange to ask such question. There are a lot of things to look at in the course of answering this question. There is the talk about the types of brokers, and the network involved, and all that. But for the purpose of this article, it is worth mentioning that brokers are the ones with the clearance level to buy or sell currency pairs. The interbank exchange comes into the whole thing too. So, sometimes, brokers have to stock up traders’ order before they are executed. This may take some time, but not much.
WHAT IS THE ROLE OF A FOREX BROKER IN THE FOREX MARKET?
From what has been said so far, you might have already gotten an idea of the role brokers play in the forex market. It might be put in a lot of different ways, but the basic role they play is to connect retail forex traders with the forex market. In a way, it can be said that they determine the success of a forex trader. This is why traders are always advised to carry out deep researches before registering with a broker.
It is worth mentioning that traders should look out for fake forex brokers who may appear professional but are not regulated under any regulatory body. This will help the trader play safe and not lose money to scammers posing as forex brokers.
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.