A trendy Forex TradingAnd Brokering!
A Forex or foreign exchange is a trade followed in international market for dealing with currencies. A person called a forex broker who acts as an intermediate between these buying and selling of foreign currencies.A forex broker also referred as retail forex broker or currency trading broker. Thus, a broker fixes a commission in dealing with the buying and selling of these foreign currencies.
The Forex broker is benefited by the change in the rates values on day to day basis. Forex broker profit is purely based on the altering values of the foreign currencies due to the exchange rates.This kind of brokerage plays a vital role in equities, derivatives, commodities, and insurance and real estate markets. In earlier days the forex brokers were contacted over phone for buying and selling of currencies or assets or shares by fixing a commission for the broker. But nowadays due to theinvasion of the internet, many registered brokers are available online for these kinds of services.
How a Forex/Finance Brokerage works?
If you have travelled abroad then apparently you would have also involved in Forex trade. All the travellers having the foreign currency needs to exchange. Whenever we go for a vacation abroad we exchange Dollars for euros at the current rate. When we return to our country we exchange back the euros to dollars. This is called as spot trades. The trader buys a specific currency for the market buy price and sells a different currency at the market selling price. Generally the buying price of the currency will be higher than the selling price. This difference between the buying price and the selling price is referred as the spread.We have paid for this spread in our vacations by exchanging the foreign currencies. It is like, if we booked a trip in euros and made a cancellation of the trip and tried to get the money spent in dollars. Definitely a great difference will be there in terms of conversion of euros to dollars.
In retail forex the traders were allowed to open an online account and all the transaction happened via internet. They used the internet banking facility. The trading majorly concentrated on the spot currency market. Forex trading was very popular among individual traders as the forex brokers stick on to the margin accounts. Using this technique the traders effectively borrow capital for their trade and multiply the principal in larger amounts (increases to 50 times, compared to the initial capital).
Retail forex traders can access the market only through forex broker. They handle the traders with two methodologies: They are the dealing-desk trading and non-dealing desk trading. In case of dealing desk trading, brokers act as dealers and perform as an opponent for a trader. Traders have to make a larger pay on larger spreads and orders would be filled by the broker.
In case of non-dealing desk trading, direct access is given to the trader to access a variety of wider spreads by the changing market trends by charging a fee amount.
Now we will get a clear idea about how do these forex brokers work and make money and how do we trust them:
General facts about Forex trade:
- Money traded every day: As per the study on April 2016 $5.1 trillion money was traded every day.
- S dollars are the most traded currencies holds 88%
- Next currency is the euros holds 31%
- The biggest traders are the banks who make 24% profit in the daily turnover.
- Pension funds and insurance companies also make great profits.
How to find trusted Forex broker?
To rely on a trusted forex broker please ensure the following:
- Security: Chose an appropriate broker by cross verifying them in the regulatory agencies of every country.
- Be aware of the transaction costs involved when dealing with a reliable broker.
- Trusted forex brokers will allow for a deposit and hassle free withdrawal of funds.
- He should have a user friendly trading platform
- Ensure the faster execution of conversion of same rates when exchange performed online.
- Ensure the variability happening in the aspect of spreads.
Above all before opening an account with a forex broker, please verify the reviews and check in the regulatory agencies for reliability.