What is a Forex Broker?
Practically speaking, a forex broker is a firm that provides a platform through which currency traders can sell or buy foreign currencies. They are also known as currency trade brokers or retail trade brokers, and they handle a portion of the entire forex market. Forex brokers enable traders to access the currency market 24/7. They monitor and advice traders on conversion rates and other prevailing conditions of the forex market as well.
Serving as Intermediary
Currency trade brokers typically serve as an intermediary between an investor and the interbank. Some of the best examples can be found in brokers that offer PAMM forex and managed trading accounts. Some of these brokers deal with the term interbank, which refers to a network of banks that conduct trade with one another. Forex brokers have relationships with these banks. The forex broker is able to evaluate the different banks and get the one that has the best price to offer to investors.
Forex Spread Costs
Forex brokers usually get their compensation via the bid-ask spread of currency pairs. For instance, a currency trading broker could purchase Euros for USD1.5471 and at the same time sell the Euros for USD1.5475. The spread here is USD0.0004, or 4 pips.
Opening an account with a foreign currency broker is similar to opening a bank account. It involves such things as identity verification and paperwork. The entire process can last a few days. But forex brokers also offer practice accounts to investors who wish to test the waters first before they begin real trading.
Forex Demo Accounts
It is a lot easier to open a demo account since only minimal information is required. A practice or demo account enables you to get started and do some demo trading until you are prepared to begin trading with real cash.
It is important to research and find out which forex brokers have a good reputation and offer the functionality that suits your need. That is why it is vital to open demo accounts with as many forex brokers as possible before choosing one.