A forex broker is a firm or individual who offers trading services to people who want to buy and sell currencies. A forex broker generally provides a trading platform to execute trades online, and may include customized trading software for the client to use.
Unlike other financial brokers who charge a fee to execute a trade, most forex brokers make their money off the bid-ask spread. Being able to see both sides of the market – bid and ask – the broker will sell and buy at a price that allows the brokerage to pocket the difference on the trade.
Retail forex brokers vary widely in quality. Some criteria that can be useful in researching and comparing forex brokers includes:
- Low spreads: Most traders want a forex broker that doesn’t take so much in the spread that a trade becomes unprofitable.
- Generous leverage: Although leverage is a double-edged sword, many traders prefer having the option of greater leverage – whether they use it or not.
- Reliable service: Being unable to enter or exit a position in a timely manner can quickly become an issue in the time-sensitive world of forex.
- Resources and support: Like any other customer, forex traders want to be able to get answers when they have questions.
- Intuitive platforms and software: The easier it is to make and manage trades, the better.
Many forex brokers offer free demo accounts to prospective clients, so traders can shop around to find a broker that meets all their needs.
Read More about Types of Brokers and How to Find Your Forex Broker?
