Forex Broker: Understanding, Types and Tips for Choosing the Right Broker

When it comes to forex business, one of the key players in this business is forex brokers. Playing forex or  trading  foreign currencies requires a broker who is a professional company that can also take the form of an agent, institution or individual whose function is to bring together the seller and the buyer in conducting foreign currency (forex) buying and selling transactions.

In the world of buying and selling foreign currencies, in reality this activity is dominated by big banks from all over the world. With the world’s major currencies such as the US, Yen, Pound and Euro, the large portion of currency buying and selling transactions is dominated by the central banks of these major countries. Therefore, because we  run a  forex business with a limited nominal and small scale, it is not possible to make transactions with these big banks.

What’s more, we also need a liaison relationship with the big bank where there is a minimum nominal limit in order to be able to make transactions with the big bank. This is where the role of a forex broker is needed. Forex brokers can serve retail transactions that will make it possible for each  individual trader  to make it possible to  trade  forex. In practice, this retail forex broker will forward requests from  traders  to larger brokers, and so on until every  trader ‘s request  can be accommodated in the forex market.

There are 2 Forex Broker Models Earning Profits, Here’s the Forex Broker Mechanism

In the world of forex brokers, each company has different rules for setting fees for their services in  forex trading  .

  • Forex brokers who take a  fee  from every lot of transactions that occur between sellers and buyers,
  • Forex brokers who only profit from the difference/ spread  between buying and selling. Generally, forex brokers currently use the difference in  spreads

Brokers take profits expressed in pips, where 2-3 pips is pretty much used by forex brokers for US, Euro, Yen and Pound currencies, and will usually take more than 5 pips for secondary currencies. However, the broker’s profit is not a net profit, because it will still be deducted from operational costs,  fees  to larger brokers and commission fees to agents.

See also  Best Forex Leverage Brokers

Online Forex Broker  , Transaction Intermediary Solution in the Digital Age

Before the internet era, when a  trader  wanted to make a transaction, he had to use communication with old technology, namely the telephone. With the advent of the internet era,  traders  can now trade forex in  real time.

There is an application called  metatrader   that can be used by  traders  to be able to monitor prices, execute orders in a much shorter time. With this tool also,  traders  can have access to news about forex trading,  chat  or discussion and others.

Online forex brokers   are a solution to the needs of  online  trading transactions in this digital era. Online  forex brokers  make it easy to do forex trading, so that currently almost all forex brokers can provide  online trading facilities  to  traders  who take shelter under them.

Things to Pay Attention to When Creating an Account at a Forex Broker 

Prior to  trading  forex, forex brokers will offer different account creation and transaction details. Here are some things you need to pay attention to.

1. Choose a Forex Broker with Flexible Initial Deposit

A well-known broker, usually will apply a large deposit to prospective customers, even though after making a deposit the money can be  withdrawn / withdrawn again. Choose a broker that is flexible in regulations that can adjust capital according to the deposit requirements requested

2. Offers Easy Deposit and  Withdrawal

Choose a broker that has the convenience of making deposits and  withdrawals , don’t just choose an easy deposit. The process of entering and withdrawing funds should only be done one day, therefore beware of brokers who offer the process of withdrawing funds for more than one day or even a matter of weeks. The disbursement process is long, there could be a game from the broker who uses our money for other purposes.

See also  Best Brokerage Accounts For Day Trading

3. Lowest Commissions,  Spreads  and  Swaps 

This point determines the amount of profit and loss that we get when  trading  forex. For example, if the broker offers a commission of 50 $, spread 5 pips (50 $) then when we open a position, we have to look for a profit of 10 pips (100 $) only for  a return on investment  and the rest is just a profit. But if the commission is only 10$ and the spread is 2 points, it means that it only takes 3 pips (30$) for the return on investment. In addition, make sure  the swap  is in accordance with the regulations.

4. The Most Varied Amount of Currency Transacted

In  forex trading  , the more options that can be traded, the better, this is to get around if one particular market experiences a profit deadlock, we can play in other markets. In general, brokers have  major currency pairs,  namely EUR/USD, AUD/USD, USD/CHF, NZD/USD, USD/CAD, GBP/USD, and USD/JPY. Then for commodities, it can be gold, crude oil and silver as well as stock indices from several countries such as NIKKEI (Japan), HANGSENG (Hongkong), KOSPI (Korea), DOW (US), FTSE (England), and DAX (Germany).

5. Having the Best Platform in the Class of METATRADER 4

Because we choose a system that can be  online , then choose a broker that provides a trading platform in the form of METATRADER 4, also make sure the connectivity is smooth, because if the connection is not smooth, Off Quotes will often occur  ,  namely the platform fails or cannot forward orders to the server because the connection is not stable. If this continues in the sense that the connection continues to falter, then the price we want to take may be far beyond our expectations. In  forex trading  , 1 second is very valuable and can cause losses.

See also  Stock Trading Success Strategies to Increase Profits

6. Providing   24-Hour Fast and Online Facilities and Services

Choose a broker that has adequate facilities and services, ranging from office telephone, email,  customer service , marketing contacts   and others. Also make sure that they can provide services 24 hours x 5 working days to provide assistance to customers. It would be better if the broker has fax, skype, or  chat facilities  so that customers can quickly ask anything and anytime to the broker.

7. Has a Good Reputation and is Popular in the Community

Take the time to visit forums, blogs or  websites  that talk a lot about brokers. Pay attention to how other people experience using broker A, is it good? Or it’s a problem. Popular brokers with good facilities and services to customers, can and should be included as a priority.

Learn a lot to avoid losses in Forex investing

Trading forex is one form of business that is quite promising, but you need to pay attention to choosing a good forex broker, so that in addition to making your money safer, you can also learn more about  forex trading  , so you can make a profit.

Leave a Comment