A broker is someone that buys and sells goods for others. They can also be defines as people that make some sort of arrangement between other parties. There is need for brokers in a whole lot of things we do in this life, and that includes trading the forex market. Just like there are brokers for other things, there are also brokers in forex.
WHO IS A FOREX BROKER?
A forex broker is a person or an organization that offer forex traders a trading platform on which to trade the forex market. The forex brokers, also known as retail forex brokers, are the only ones that can ever grant a retail forex trader access to trade forex online. That is to say that without them, there is no way a person can trade forex online. Little wonder why emphasis has always been placed on finding the right forex broker when looking to trade the forex market. A broker can make all the difference in trading the forex market.
The forex broker handles a small portion of the overall forex market, and are always up at all times to meet the needs of traders. Basically, what they do is to buy commodities on behalf of traders that may want such commodities. If they buy at, say $1, they can sell off at $1.01, or at any other price they deem fit. The fact is, they do not sell at the same price they buy, or they will not make any profits from their business.
HOW BROKERS MAKE PROFITS FROM THEIR BUSINESS
Just like was mentioned earlier, forex brokers sell off at a price that is slightly higher than what they bought. That is one of the ways they make money as forex brokers. That difference between how much they bought, and how much they sold, is known as a spread. Traders usually go for brokers that do not charge too much spread, and forex brokers on the other hand, try as much as they can to offer attractive spreads in order to get more clients.
Another way forex brokers make money from their business is to charge a fee per transaction. That is to say that every transaction a trader makes, he or she is expected to pay a token to the broker at the end of it. Basically, it does not concern the broker if a trade was successful or not, all the broker does is facilitate the trade as ordered by the trader, apply the spread, and take the transaction fee.
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.