What Is A Forex Broker?
by Eddie Tobey
The Currency / Foreign Exchange market is the world’s largestand most dynamic market. Nearly $1.8 trillion is traded everyday. The word is derived from the words Foreign Exchange.
A Broker is an individual or firm that acts as an intermediarybetween buyer and seller. brokers are firms that deal inforeign exchange. The foreign exchange market is quite similarto the equity markets, except that typical brokers do notcharge a commission. However, brokers are required to havea license.
Forex brokers earn money from the spread (also called “pip”).The spread is the difference between the prices at which acurrency is bought and sold. A pip is the smallest priceincrement in a currency. For example, in Euro/US Dollar(EUR/USD), a move from 0.9008 to 0.9009 is one pip. In USDollar/Japanese Yen (USD/JPY), a move from 127.41 to 127.42 isone pip.
Forex brokers can be compared on the basis of the spread theycharge. Most brokers publish live or delayed prices ontheir websites so that the investor can compare the spreads. Itis, however, necessary to check if the spread is fixed orvariable. Variable spreads appear small and attractive when themarket is quiet, but when the market gets busy the brokerwidens the spread, meaning that the investor will gain only ifthe market is favorable.
Forex brokers are usually tied to large banks or lendinginstitutions. This is because of the huge sums of money tradedin the foreign exchange markets. brokers are required toregister with the Futures Commission Merchant (FCM), and areregulated by the Commodity Futures Trading Commission (CFTC).
A new trend among brokers is the emergence of online forexbrokers, who offer trading facilities to “retail traders” usingadvanced technology. With these facilities, anyone with acomputer and an Internet connection can trade in the forexmarkets.
About the author:Forex Broker Infoprovides detailed information on brokers, tradingand market makers, and other forex-related topics. BrokerInfo is the sister site of Incorporating inFlorida Web.
