All about forex brokers
In forex market, individual
trader deal with currency pairs in placing trades. A trader will buy a
currency and then sell a different one, hoping that the one he has sold will
rise in value compared to the one he buys. In doing so, individual have to
enlist the help of forex brokers. A forex broker refers to an intermediary
between an interbank and you. An interbank is term that is used to refer to a
network of banks that normally trade with each other.
currency and then sell a different one, hoping that the one he has sold will
rise in value compared to the one he buys. In doing so, individual have to
enlist the help of forex brokers. A forex broker refers to an intermediary
between an interbank and you. An interbank is term that is used to refer to a
network of banks that normally trade with each other.
Most brokers will normally
have a relationship with more than one bank. This enables them to obtain and offer
you the best price possible. For an individual trader to place a trade in the market,
he must open an account via any forex broker.
These brokers will normally have access to huge liquidity providers who are important in helping find a counter party with whom you can trade against.
you the best price possible. For an individual trader to place a trade in the market,
he must open an account via any forex broker.
These brokers will normally have access to huge liquidity providers who are important in helping find a counter party with whom you can trade against.
Opening an account with a forex trader
This is similar to opening
a bank account. It requires identity verification, paperwork and such. The entire
process may take several days before the account is opened and operational. However,
if you just wish to test the waters, the process is easier. Forex brokers will
give you demo accounts that you only need to provide minimal information to
open. These accounts enable you to get all the things that you need to set yourself
up for forex trade as well as to gain some experience by practice trading with
virtual money until you are good enough to trade with real money.
process may take several days before the account is opened and operational. However,
if you just wish to test the waters, the process is easier. Forex brokers will
give you demo accounts that you only need to provide minimal information to
open. These accounts enable you to get all the things that you need to set yourself
up for forex trade as well as to gain some experience by practice trading with
virtual money until you are good enough to trade with real money.
Types of forex brokers:
Market markers
This is a type of forex brokers that always quotes both an ask and
bid price for each currency pair. If traders place a trade with
any of this type of brokers, the broker will be the counter party in the trade.
This implies that each time you trade, you will be doing so against your
broker. Consequently, your trade does not get to the market and any money you
make is paid by your broker. This type of brokers is normally
compensated by the variance between the bids and ask price in any trade.
bid price for each currency pair. If traders place a trade with
any of this type of brokers, the broker will be the counter party in the trade.
This implies that each time you trade, you will be doing so against your
broker. Consequently, your trade does not get to the market and any money you
make is paid by your broker. This type of brokers is normally
compensated by the variance between the bids and ask price in any trade.
ECN BROKERS
Another type of brokers is the (ECN) electronic
communications network brokers. With these forex brokers, you don't
trade with them every time you place trades. Instead, whenever you place one, the order is electronically placed in the market via electronic communications
network. This system then finds a counter trader with whom you trade against
from the market. The broker will normally receive a commission for his services.
communications network brokers. With these forex brokers, you don't
trade with them every time you place trades. Instead, whenever you place one, the order is electronically placed in the market via electronic communications
network. This system then finds a counter trader with whom you trade against
from the market. The broker will normally receive a commission for his services.
Types of balances
While trading or working with forex brokers, there are
normally two types of balances. One balance is your actual balance non
inclusive of your open trades. The other balance represents the balance you
would have if you close all your open trades. This second balance is called net
balance.
normally two types of balances. One balance is your actual balance non
inclusive of your open trades. The other balance represents the balance you
would have if you close all your open trades. This second balance is called net
balance.
The spread
Once you open a trade with one of the forex brokers, they
will normally pass it to the market on your behalf. For doing so, they offer
you a price that is different from the amount they are able to get in the
market. This is referred to as collecting the spread. The spread is normally taken from your leveraged
account size and not from your account balance size and it's the brokers remuneration
for his services.
will normally pass it to the market on your behalf. For doing so, they offer
you a price that is different from the amount they are able to get in the
market. This is referred to as collecting the spread. The spread is normally taken from your leveraged
account size and not from your account balance size and it's the brokers remuneration
for his services.
All trading can be a risk!
