You are here to know about a forex broker, right? Welcome. Before we proceed, let me tell you a story.
I know of a friend who was scammed of his trading capital after he gave all his money to a random guy who claimed to help people gain profitable access to the forex market.
That day, I could not help but laugh at the gullible decision he made. Would you like to know the criteria he should have checked before he gave his money out to the fake broker?
Are you ready to know what a forex broker is? You are in the right place. So, relax and grab some snacks as I will be taking you through the journey of what a broker is.
What is a broker?
The English dictionary defines a broker as a person who buys and sells things for other people. A broker can also be a mediator between a buyer and seller.
In another definition, a broker is an agent who involves in the exchange of transactions or messages.
In addition, a broker is someone who liaises between two or more parties to attempt to achieve an outcome.
Definition: A forex broker is a company or service that helps traders to gain access to buy and sell currencies in the financial market.
This forex broker, which is also known as a currency trading broker, serves as the middleman between retail traders and the market.
It is a link between a trader and banks that have access to forex liquidity.
Just like a retailer links a wholesaler to a final consumer in a real-life business, a broker links a trader to this network of banks.
Forex brokers process traders’ requests through a system called a Non-dealing desk.
You might want to know how these brokers make their money. It is simple and they make their money through commissions on each trade that a trader places.
Can brokers steal a client’s money just like they stole my friend’s money? Yes, they can steal a client through the typical theft and the violation of security laws. and that is why you must be careful while selecting a forex broker.
We constantly review the best forex brokers on our website to help you make the best decision when it comes to selecting a forex broker.
What to look out for before choosing a forex broker?
Just like my friend who was scammed on the internet by someone claiming to be a forex broker, a lot of people have lost their money to shady brokers.
Here is an analysis of the things you should always look out for before choosing a broker.
Firstly, does such a broker have a license, and is it regulated by financial bodies? In any business, the level of security should always be considered.
Every real forex broker must the registered, regulated, and licensed by a regulatory body.
In the United States(US), regulatory bodies such as the Financial Industry Regulatory Authority(FINRA), National Futures Association(NFA), and the Commodity Futures Trading Commission(CFTC).
Traders should try to avoid unregulated brokers. You can check whether a broker has been regulated in the “about us” section of their website.
Also, check their deposit and withdrawal process. A good broker must have an easy withdrawal process.
When my friend was about to be scammed, he was asked to wait for sixty days before he could get his profit. In the end, he got scammed.
A favorable broker should have a very easy withdrawal process.
In addition, a good broker must have both local and international recognitions. Awards, testimonies, the and referral history of a broker must be confirmed before a trader decides to choose such a broker.
Customer Service is also an important feature of a good broker. The forex market runs 24 hours from Mondays till Fridays. A nice forex broker should have customer service that is reachable for 24 hours too.
Forex account type: You should always consider your investment motive whether it is for the long term or short term.
Some brokers do not accept any account that has less than 50 USD as capital while some brokers have a cent account scheme for anyone that wants to embark on short-term trading.
Why a forex broker is important.
Forex brokers act as intermediaries between the market and retail traders. In fact, it is safe to say that without a forex broker, retail traders might not be able to access the market.
These brokers help traders to execute their orders. When a trader clicks on buy on his trading platform, a non-dealing desk receives the order and processes it fast. Only brokers use this kind of system called a non-dealing desk.
Also, some brokers provide nice and amazing investment plans for their clients.
Lastly, some brokers give more information about the situation of currencies in the market. These brokers provide daily analysis of market conditions for their clients and a good example is the FBS broker.
In the usage of margin calls(refer to our article on what a margin is if you do not understand what a margin call is), a broker helps to notify a trader about an impending loss.
A broker serves as the intermediary between a trader and the market.
Forex brokers serve different purposes such as executing orders, giving access to traders amongst others.
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