Forex Brokers — Helping to Maximize Your Success
A Forex broker is a broker dealing in foreign exchange, somewhat similar to a real estate broker who deals in real estate and properties. Simply put, a Forex broker is your portal into the world of currency trading. However, the Forex market is not the perfect place to play with as a novice and beginner as there are many criticalities involved along with much risk bearing capacities. Novices can very quickly get their fingers badly burnt. But inexperience is not the only reason to consider using a Forex broker to trade in the high-risk international currencies market.
So, a Forex broker is a company that offers you access to the Forex market and allows you to work for 24 hours a day with major currencies like EUR, JPY, GBP, CHF, etc. against the US dollar and other currencies on the spot, i.e., according to the current prices on the international foreign exchange market. But the level of profits depends only on your abilities as well as your timely decision.
Although the role of the FX broker is relatively redundant as a result of technological advancement and increased awareness, we cannot completely underestimate its role. The new paradigm shift has had something of a democratizing effect on the financial markets, and in the years that have followed a plethora of banks and brokerages have extended the range of their services to a new market by packaging up their online trading systems for the retail market, enabling the more modest investor to trade from their own computer screen — even on the previously out-of-reach currency markets. This is where the real role of a Forex broker starts.
A pip is nothing special but Price Interest Points. In the Forex market, currencies are always priced in pairs. The quoted price is the level where we, acting as the market maker, are willing to buy/sell the currency pair. Currencies are are usually quoted to four or five decimal places, with the last placeholder called a point or a pip. A pip in most currencies is 1/10,000 of an exchange rate (in USD/JPY, it is one hundredth, likewise you can find for others).
Let's see some more information about spread. As with all financial products, Forex quotes include terms like 'bid' and 'ask"'. The 'bid', in its simplest terms is the price at which a dealer is willing to buy (and clients can sell) the base currency in exchange for the counter currency. The 'ask' is the price at which dealer will sell (and clients can buy) the base currency in exchange for the counter currency. The difference between the bid and the ask price is referred to as the spread. The spread defines the trader's cost, which can be recovered with a favorable currency move in the market. The value of a pip is determined by the pair of currencies being traded, the rate at which the currency pair is trading and the size of the position being traded.
There are many great Forex brokers who maintain tight competitive spreads in the major currencies against the US dollar (including USD/CAD and AUD/USD) and other (minor and exotic) currency pairs. Some of the major features of a good broker are:
- Real-time streaming prices
- Price certainty on market orders
- Competitive swaps and commission
- Fixed spreads below 1 pip