Have you ever come across the term ‘Forex Brokers’? For those who have not, be assured that it is something which is very important for a country’s economy and the general welfare of the public of a country in all financial matters. In this article, we would talk about the importance of foreign exchange and dive deep into all details about them.
Who are Foreign exchange brokers?
A Forex broker is a firm which renders all currency traders along with providing the access to various platforms where one can trade and buy or sell foreign currency. They are known as retail exchange brokers or sometimes even referred to as currency trading broker. Although it is agreed and well accepted that these brokers handle a very small portion of the whole foreign market of a particular country, but their role is quite important and cannot be overlooked. The 24 hour currency market can be well accessed with a lot of ease using these brokers.
How are foreign exchange brokers compensated?
There are basically two ways in which the Forex brokers are compensated. The first and the foremost way is by spreading of a currency pair through the bid and ask method. An example can be given that if a exchange broker buys some euros for 2.250 US dollars, and sells all the bought euros again for 2.255 US dollars, and earn that extra margin. Also, these brokers, just like any other, charge some transaction fee depending upon the amount being dealt with. But, one thing that is to be noted and has advantaged a lot of customers is that there has been a rise in the number of these brokers during the previous five or six years. Hence, the way it has benefited the customers in such a way that there has been a sudden dip in transaction fee that these brokers charge, due to the ever rising competition among the foreign exchange brokers.
When are Forex Brokers useful?
They can help in trading among almost all important and popular currencies, like EUR/USD, USD/JYP, etc.
Terms of a Foreign Exchange Broker
Before proceeding, a foreign exchange would ask you to submit some money in their account. This money is taken as collateral. Customers can also trade money, which is larger than what is present in their account by leverage.
Things to Remember
We have seen how important foreign exchange are in a country’s finances and trading and also for the general public. But, before consulting a Forex broker for initiating a trading practice, one must do some careful and planned research as to which foreign exchange brokers are reputed and trusted. One should consult only recognized, reputed and trusted foreign exchange brokers to stay on the safe side. Also, always look for one that can help you to fulfill the specific purpose you are looking for. It is always good to test as many different platforms as possible before choosing one.
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by Shalini M