A forex market maker is a broker dealer firm that can publicly quote buy and sell price of a commodity. In the time past, retail forex trading was not often heard of. There were a few of them who can afford enough financial resources to trade really large lot sizes, and as such, retail forex traders were few and far apart. On the average, transaction in those days takes as much as $1 million at least, and there were no such things as leverages and margins; totally different from what is obtainable in the forex market today. Seeing as access to forex trading was limited to a lot of people, forex broker saw the opportunity to make the market more accessible by coming up with acceptable and convenient terms that the masses can go by. That is how forex brokers are market makers.
HOW DO MARKET MAKERS FUNCTION?
There are a lot of things taken into consideration in running a brokerage firm, but the summary of it all is to build the biggest client base possible. As market makers, brokers compete with one another to deliver the best price possible to their clients, believing that the lower the quotes, the more attractive it is to clients. Their major function is to match traders that want to buy/sell a commodity. With a reasonable client base, it is easier to find a trader that wants to buy a security and match it with another that want to sell. This eliminates the stress that one may have to go through in order to find another trader to sell to or buy from.
THE PROS OF WORKIGN WITH MARKET MAKERS
Traders stand to benefit more than just being matched to another forex trader. They enjoy instant online support from the market maker customer care team, access to reliable technical analysis, market news, commentary, and a host of educational materials.
Most market makers offer their clients the best trading platform there is, specifically with the newbies in mind. The most demanded platform is the MT4 trading platform; which according to many traders, is an all time best.
With a forex market maker, you get to know what you are dealing with at all time. The spreads are fixed and no commissions are applied. There are no forms of requite or slippage.
It is the job of the market maker to stabilize the view of the marker for the trader, which can lead to a low volatility.
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