A forex broker is essentially a financial institution that offers traders access to a virtual platform for trading in foreign currencies. Forex is short for forex trading. Transactions in the free marketplace are usually between two different global currencies. A forex broker can also be called a commercial forex broker or even a discount forex broker. They trade on behalf of individual traders and institutions, acting as a liaison for them.
Forex brokers work in pairs; one that trades in the US dollar and the other that trades in the Japanese yen. The advantage of trading forex on a large scale through these brokers is that they have access to massive amounts of leverage.
They can leverage trades up to ten times their initial investment and leverage is not an issue; the broker will always buy at a price higher than its competitors. Traders can benefit from leverage to increase their chances of success; however, it can also lead to disaster if used improperly.
As previously mentioned brokers are financial services providers that offer access to international markets. These are firms or individuals that guarantee a specified set of currencies on specific exchanges. Most firms will also allow traders to buy and sell currencies based on their information.
There are many types of forex brokers with zar accounts out there depending on the company, but the most common types are the discount brokers, who are low cost and usually give out outdated information; the full-service brokers who provide more information and perform more functions; and the platform brokers who perform the actual trading.
Discount brokers are usually recommended for new traders because they offer lower fees. Discount brokers don’t do the actual currency trading for you, instead, they act as a communication link for you and the market. This makes them valuable for someone looking to trade multiple currencies in a short amount of time.
Full-Service Brokers, On the other hand, these are brokers that provide the complete suite of services and are often the most expensive. However, if you are new or relatively new to trading the forex, you may benefit from investing in one of these full services platforms. These platforms are usually developed by large financial services companies like banks, who want to provide their clients with the most complete and useful tool possible.
You are given access to markets that you would otherwise be unable to access, and you can make effective trades, in real-time. Most platforms will also have back-office support which allows you to work your trades through other third-party financial institutions.
Hybrid Forex Brokers These are platforms exclusively for forex traders who prefer to trade in multiple pairs of currencies. This is because they offer better flexibility and options when it comes to trading, especially if you need to be able to trade in multiple pairs at any given time.
As you can imagine, they are quite expensive, but they offer the most functionality and flexibility of all the types of platforms out there. Most hybrid forex brokers are available only to commercial customers and they are not accessible to the general public. They are primarily aimed at professional traders and investment managers.