By now you should have a better glimpse into Forex Trading and have better approaches for preparation. In this #AnalysisAside post, we will introduce about Forex broker, by which its existence made retail Forex trading possible.
Turning the Impossible Possible
A Forex broker provides a platform that bridge retail traders to the Forex market, allowing individual traders to buy and sell foreign currencies. Before the existence of Forex broker, the Forex market is only accessible by big players such as major banks around the world and multinational organizations. With the advent of Internet and the decentralized nature of Forex market (Forex market is not centralised and not controlled by a single entity, unlike stock markets which are controlled by NYSE and other Stock Exchanges), Forex brokers arise to allow retail traders to trade in the Forex market. Today, traders who are interested in Forex trading can just register with any Forex broker and start trading Forex.
Along the point of turning what was impossible possible, how exactly does a Forex broker made retail trading possible? Forex broker acts as a middleman between Forex traders and other participants in the market such as liquidity providers and other Forex brokers. In the interconnected market, Forex broker get access to the currency price feed, which in turn made available for its clients to buy or sell on. Through technology such as Straight Through Processing (STP), Forex broker match your orders with other respective sellers or buyers in the market to make sure that your orders execute in time and without error.
Forex broker also play another vital part in making retail trading possible – by providing Leverage. Although trading in smaller volume is possible, but the standard lot size of Forex is 100,000 unit. For example, if you buy one (1) lot of EUR/USD at 1.14730, you would require a hefty amount 114,730 USD (1 unit of EUR/USD is 1.14730; 100,000 unit of EUR/USD is 114,730). This is where leverage comes in. Leverage allows traders to magnify their trading capital by using borrowed capital from the Forex broker. For example, if you buy one (1) lot of EUR/USD at 1.14730 with the leverage of 1:100, you would only require the amount of 1,147.30 USD. In such a way, leverage also increase the opportunity for retail trader to increase their profit without a hefty amount of capital. However, while leverage might increase the gains, it might also cause losses if the trend go against your trade.
Besides that, Forex broker also offer educational tools and useful resources for traders. World news and current events that might cause any fluctuation in the Forex market are often posted on the broker’s website to keep traders updated. Some Forex broker also provide round-the-clock customer support. Whenever you face any problem online or any confusion about trading, customer support team is always ready to clear it up for you.
If you’re interested in Forex trading, the very first thing you will need to do is pick a prestigious broker for yourself. Pick one that you think it will suit the way you operate and make the best out of your Forex trading adventure.
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