Why Forex Broker is Needed to trade in the Currency Market?
Every day, more and more people are venturing to try to make profits by trading currencies. However, few know those “secrets” that will prevent their passage through the foreign exchange market from being short-lived. Among those secrets is the need to have a Forex Broker. This is an irreplaceable entity for your operations in this enormous global market.
In this article, you will understand the role of a Forex broker.
What is a Forex broker?
The Forex (Foreign Exchange) market is the market where individuals, companies, governments, and financial institutions exchange currencies from all over the world. It is the largest global market, moving around 7 trillion dollars daily in exchange operations. It’s open and available to you 24 hours a day. And to access it, you’ll need a Forex broker.
This is an entity or company that acts as an intermediary between retail investors like you and the foreign exchange market. Transactions in the Forex market are carried out using currency pairs. If you want to buy the EUR/USD pair, the broker or dealer will be the intermediary between your intention to buy and someone who is selling the same pair.
The foreign exchange market does not have a physical space for operations. All transactions are carried out electronically. When you buy a currency pair, the seller might be on the other side of the planet. The link between them and you will be the Forex broker.
On the other hand, the Forex broker will provide you with the means to carry out your transactions, basically, a trading platform. This point is fundamental for those who want to speculate on the price changes in currencies (trading). It’s clear that if you wish to make an occasional purchase of foreign currencies, you won’t need to open a Forex account. You can just go to your trusted bank, and it will take care of the transaction.
Why do you need a Forex broker to trade?
If you’re going to make Forex trading a frequent activity, you’ll need an account. Forex accounts are opened with a Forex broker. In simple terms, without one, you can’t access the foreign exchange market.
Now let’s look at what other features brokers have, that facilitate operations in the forex market:
Market Access: The foreign exchange market is decentralized and not traded on a central exchange. Forex brokers act as intermediaries and allow you to access this market to carry out currency buying and selling transactions.
Trading Platform: Brokers provide an online trading platform that allows for real-time operations. These platforms offer analysis tools, charts, technical indicators, and economic news channels.
Order Execution: Brokers execute your buy and sell orders in the market. This means they can help you open and close positions according to your instructions.
Check out: Forex brokers with ZERO minimum deposit
Leverage: Forex brokers offer the option to use leverage, allowing you to operate with larger positions than your initial capital would permit. This can amplify your gains but also increase your losses, so it should be used with caution. E.g. Example of Forex leverage showing profit and loss
Wide Variety of Currency Pairs: Brokers provide access to a wide range of currency pairs that you can trade. This includes major, minor, and exotic currency pairs, giving you the opportunity to diversify your trades.
Tools and Resources: Forex brokers often provide additional tools and resources, such as market analysis, financial news, economic calendars, and training. These resources can help you improve your skills and make more informed decisions.
Regulation and Protection: Brokers regulated by financial authorities offer a level of security and protection for your funds. They are subject to strict rules and regulations that ensure ethical business practices and the safety of your assets.
Liquidity: Brokers have access to market liquidity and can facilitate the execution of orders even during times of high volatility.
Your journey to becoming a professional forex market trader requires an unavoidable step: having an account with a Forex broker. Without it, you won’t have access to the market and the ability to trade Forex.
Choosing your broker should be done carefully. They will be in charge of processing your orders, but most importantly, they will handle the money in your Forex account. When choosing a broker, make sure it is regulated by the competent authorities. They should offer 24-hour customer service, preferably in your language. Check other users’ opinions about the reliability of your broker. Lastly, make sure you understand the fees and commissions you will have to pay.
Hi, I am Nikesh Mehta, owner and writer of this site. I’m an analytics professional and also love writing on finance and related industry. I’ve done online course in Financial Markets and Investment Strategy from Indian School of Business. I can be reached at [email protected].