The foreign exchange is considered as the largest capital market in the world with a turnover in excess of $4 trillion a day. As you might expect with any big markets, it has the potential for significant returns, but the risk of suffering huge losses also comes with it. One must apply the appropriate money management techniques to survive in the industry.
Despite the size, the market has no central exchange for the traders to complete their transactions. Rather, traders need to rely on the intermediary, Forex Broker, for all the activities.
Forex Broker is a financial services entity that connects forex traders with the forex market. In simple words, they provide access to a platform for how to start trading stocks and buying and selling foreign currencies. The trading in the forex happens between two currencies and is traded on the Interbank.
Interbank means banks trade electronically with each other at various prices, and the costs will depend on the bank. A forex trading account is something like a bank account where you can hold the currencies and use them for trading.
The foreign exchange market must be open 24 hours and is a necessity for the global economy. The clients of these forex brokers can include large financial firms that trade on behalf of investment banks and other customers and retail currency traders. A forex broker comparison is made when a firm wants to choose one.
When we talk about an individual forex broker, they only handle a small portion of the total market.
Now, let’s shift our focus towards the role of the Forex Brokers these days.
Most transactions on the forex platforms are between the pair of currencies of the G10 countries. The currencies are US Dollar, Euro, Pound Sterling, Japanese Yen, Australian Dollar, New Zealand Dollar, Swiss franc, and Canadian Dollar.
Most platforms allow their customers to trade in the currencies of the emerging markets. On the forex trading platform, the trader opens the trade by buying a currency pair and then closes it with selling the same. When a trader closes the trade by selling the currency pair, it is equivalent to buying US dollars of Euro. Most traders have a look at the Forex broker comparison before selecting one.
Opening an Account
Opening an account nowadays has been quite simple. The opening of the account can be completed online without any hitch. But before opening the account, you must go for a forex broker comparison to make sure you are on the right platform.
Before starting the trade, the traders need to deposit the money in the new account as collateral.
Forex brokers make money two ways, first is through the bid-ask spread of currency pair. And second is by charging an additional fee per transaction for the use of the platform. Why is why it is necessary to perform forex broker comparison to choose a platform that charges less. Some brokers charge a monthly fee for access to a particular platform.