A forex trading broker is a firm or company that provides forex traders with various trading platforms for the sole purpose of buying and selling of foreign currencies. They monitor and advice the forex trader on the current happenings in the forex market including currency exchange rates. These forex trading brokers which are also called retail forex brokers handles a small part of the overall forex market volume and are usually compensated through the bid and the ask spread of a currency pair.
TYPES OF FOREX TRADING BROKER
They are majorly two types of forex trading broker. The first is the ECN (Electronic Communication Network) broker who are experts that uses anelectronic communication network to provide forex traders direct access to other currency market participants and offers a transparent and tighter bid and ask spread to the traders. The second form of forex treading broker is the market makers which offer a wider bid and ask spread to forex traders and make their profit off the differences between the buying and selling price of currency pairs.
THE ROLE OF A FOREX TRADING BROKER IN THE FOREX MARKET
The role of a forex trading broker is to give advice and assistance to very forex trader or investor. The forex market is the largest currency market every known and it has the ability to operate round the clock, and because of this, the market is filled with pitfalls for beginners and experienced traders alike. Using a forex trading broker will enable the trader trade in the market 24/7 a day with valid advice and great decisions on price leading currencies in the globe at any point in time.
In forex market trading, a forex trader by definition has no physical proof of his investment and trading activities because in real terms, he is not actually buying anything. Here, the forex broker engages his money to predict the currency movement and price movementsin relation to the two currency pairs. The broker then provides his prediction to the forex trader in form of trade orders.
Forex trading broker also offers safety, security and reliability to forex traders at a length. They also offer a certain percentage of leverage which are loans extended to margin account holders by forex brokers. Leverages works in the favor of a trader with winning positions because the potential for profit maximization is greatly increased. They also offer a system for easy deposit and withdrawal of funds and capitals by providing account holders with a credit card via PayPal or wire transfer, personal and bank checks.
They offer software and platforms to forex traders for a better trading section which are easy to use, visually pleasing, properly designed interface with basic fundamental and technical market analysis tools. By using these trading platforms, trades can be entered and exited at ease. They also narrow down the currency market by providing the most frequently traded currency pairs to trade with.
In conclusion, before choosing a forex broker for your forex trading, it is very important for a trader to do some research in other to find out if a broker has good reputation and also have the functionality you seek for.it is very important to test out as many platforms as possible before making valid decisions on which broker to use.
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.