What is a Forex broker?
Forex means foreign exchanges, and there are companies available that provide trading services to traders, peoples called them broker. Forex brokers are similar to financial organizations or companies, that's are offering traders various trading services including trading platforms. A trader can't get access to the trading platforms directly, that's why traders need brokers to buy or sell currencies in the live forex market.
The Role of a Broker
The maximum forex trading transactions are between the top 10 currency pairs. The following currencies are the most powerful in the world Euro (EUR), U.S. dollar (USD), Japanese yen (JPY), New Zealand dollar (NZD), the Australian dollar (AUD), British pound sterling (GBP), Canadian dollar (CAD), Swiss franc (CHF). Peoples are also called them G10. The maximum number of brokers allow customers to trade in other currencies, including those G10 currencies. A reputable broker is very important for a long-term trading career. Because a broker can boost your trading by giving you high leverage and margin trading opportunities.
Types of Brokers
Basically, there are two types of brokers available in the trading world, these are 1), Dealing desk brokers, and the other one is No Dealing desk brokers. But investor analysis divided the No dealing desk brokers into 2 parts, STP and ECN+STP.
1) Dealing desk brokers: Peoples have also known as Market Makers. These types of brokers are providing liquidity to traders and making money through spreads. DD brokers create a market for customers that means they often take the other side of their customer's trades.
2) No Dealing desk brokers: If you look at the name NDD, that means they do not pass customers’ orders through a dealing desk These types of brokers are working as a bridge, they build a structure between a trader and trading platform. NDD's brokers charge a few amounts of commission for trading or they can increase the spread slightly. As we said NDD’s are divided into two parts called STP and ECN+STP. Let’s take a simple idea about STP and ECN+STP brokers.
In order of STP's all of the orders are routed to the broker's liquidity providers and all prices are executing at the bid/ask rate which is provided by liquidity providers. In that case, big banks, hedge funds, and investors are working effectively as counterparties in each of the trades.
We found a few similarities between an STP and an ECN Forex broker, however, the primary difference between is routing. As referenced over, the STP can decide to manage different liquidity suppliers out of their liquidity pool, while the ECN goes about as a sort of center. The center acts as the liquidity source, as it is addressed by banks, mutual funds, and all the significant market players.
Features of a good broker
Before choosing a broker, a trader should know how they can identify the broker as good/bad in the market. Before joining with a broker please take a look at the following features of a broker.
Forex broker's regulations are one of the most important things while we are choosing a broker because if a broker isn't under regulatory supervision, they can easily fraud with customers and there is no way to make cases against them. Regulated brokers must follow all of the business standards to continue business in the market, that's why they can't fraud easily with their clients.
Leverage means to borrow funds from brokers. A trader can open a bigger position of trade than his/her total capital by using leverage. Although it's risky for traders, it is very effective in trading to make better profits.
Obviously, it's one of the most important things before you start your trading journey. A liquid trading terminal is the backbone of your trading career. Many brokers are building their own trading software but these are not trustable, you should choose, MT4/MT5, or other popular platforms. Before joining with a broker take a look at their supported software.
Deposit and withdrawal methods
The deposit and withdrawal method are important because you have to deposit and withdraw your monies from the broker house. You should choose the broker where you can deposit your funds and withdraw the funds easily.
Customer supports is required everywhere in our life. There are simple and complex technical problems everywhere, so you should try to check the customer support department of your broker before joining with them.