Forex brokers – what are they?

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A Forex broker is an operator linking you – the trader – and the FOREX market.

Today brokers come in the form of software (available online or downloadable) that allows you to carry out your trading operations on the internet.

forex-broker

All good brokers will enable you trading in virtual mode or “demo” mode. It gives you plenty of room for speculating in the FOREX market without taking the risk of losing real money!

When you trade-in real money, the broker takes note of your orders and applies them instantly (or almost) by investing your money using major international banks. Your capital is therefore found in the Forex market until you close the transaction to recover your capital inflated by your profits or reduced by your losses.

There are dozens of different brokers. Some are preferred for beginners, others for intermediate traders, and some are reserved for expert traders. This is why going for the right broker is essential to get started properly in Forex trading.

There are two types of brokers: market maker forex brokers and no dealing desk brokers.

The NO dealing desk broker is the intermediary between the trader (you) and the interbank market. All your transactions are automatically placed on the market. There are two types of no-dealing desk brokers, STP (Straight Through Process, like FXCM) and ECN (Electronic Communication Network).

The market maker broker serves as the exchange office. This means that they behave like the market. Some positions are covered, some are not.

The Broker as an Intermediary Company

Brokers, as companies, provide added value because they can provide market research and market data. Brokers can represent either the seller or the buyer, but usually not both at the same time. Buying and selling financial instruments is virtually impossible without a broker’s services, which offers access to financial markets.

Brokers should have the resources and tools to reach the most extensive possible base of buyers and sellers. They then filter these potential buyers or sellers to set up the perfect match between their terms.

In contrast, a sole proprietorship, particularly one that is new to the market, is unlikely to have the same access to clients as a broker. Another advantage of using brokers is the cost – they can be cheaper in smaller markets, with smaller accounts, or with a limited range of products.

The most important steps when choosing the Forex broker

If you plan to trade and invest in the financial markets, you absolutely need a broker. And not just any broker, but a broker who can best meet your needs.

Before embarking on the arduous work of identifying the best broker for you, make sure you know your needs and what criteria your broker must meet. Information about the brokers is mostly available on the net in the form of broker reviews. You need a type of broker who will make your job easier and help you achieve your goals.

It is true that if you are going to ask five investors or traders with experience what they mean by “a good broker” or “the best broker”, you will receive five completely different answers because each broker has its objectives, its own needs, its preferences in terms of trading, its own risk aversion, its own strategies, etc.

So a broker who is “the best” for one trader may be “average” for another or “totally inappropriate” for another. Find the one that suits you best and you are on the way to make nice profits by trading on the Forex market.

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Forex broker - what is its role in the financial markets
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Let’ see what is Forex broker, what are the features of the good  broker and how to choose the right one for your Forex trading
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