Forex Brokers Ratings and Reviews by Real Users and Professionals

A Brief Explainer on What a Forex Broker Is

The term “forex broker” gets thrown around a lot in the industry. However, for the uninitiated, it may come off as intimidating as it is somewhat technical. However, it really isn’t that complex. Let us explain: forex brokers are companies that offer traders access to a platform that lets them either buy or sell foreign currencies.

Transactions that are done in this market normally involve two different kinds of currencies so forex traders buy or sell a specific pair that they are keen on trading.

There are times that forex brokers are also referred to as a retail forex broker or currency trading brokers. Retail currency brokers make use of these traders to access the 24-hour currency market to make speculations.

What Roles Does a Forex Broker Play?

Forex brokers give access to trading on the most prominent currency pairs such as EUR/USD, USD/JPY, USD/CHF and GBP/USD as well as all remaining G10 currencies and the corresponding exchange rates. In addition, brokers will also usually let clients trade emerging market currencies.

A forex broker makes it entirely possible for a trader to initiate a trade by purchasing a currency and then, also close the trade by selling that very same pair. One example is if traders want to exchange EUR/USD, then they need to purchase that particular pair. This basically equates to purchasing Euros with the use of US Dollars. In closing the trade, the brokers would then sell off the pair, which is essentially purchasing US Dollars with the use of Euros.

Now, if the exchange rates were larger when the traders settled the trade, the brokers would end up with a profit. However, if it were the other way around, the brokers would come away with a loss.

Compared to last years, the quality of client services that forex brokers provide have grown by leaps and bounds. While opening a forex trading account used to be a hassle, it isn’t anymore. On the contrary, it is now fairly simple and can be done over the Internet. However, bear in mind that before you can trade, a forex broker will ask clients to put in money into their account to serve as collateral. At the same time, the broker also offers a certain amount of leverage to customers so that they are able to trade more than what is actually inside their account.

This kind of leverage depends on the country where the traders originate. There are times when the leverage can be 30 and there are situations when it can run as high as 400 times the amount that is present in the account. This kind of high leverage is what makes forex trading to be a high-risk, high-reward kind of enterprise.

But How Do Forex Brokers Make Their Profit?

There are two ways that forex brokers can usually make money. One is through the bid-ask spread of a particular currency pair. One example is

Forex brokers are compensated two ways; firstly through the bid-ask spread of a currency pair. There are also some brokers that charge fees, whether it is for a transaction or even a monthly fee for access to specific software. There are even brokers that charge fees to clients for access to unique trading products like exotic options.

Competition amongst forex brokers is a really fierce and most firms that cater to retail clients have found that the best way to attracting new clients is by waiving as many of the fees as possible. This has resulted in many firms offering free or a minute transaction fee that goes beyond the spread.

Meanwhile, there are also forex brokers that manage to make profit with the use of their own trading operations. This can prove controversial if their trading has a conflict of interest with their clients. However, regulation in this realm has aided in considerably lessening this practice.

How Can You Vouch for a Broker’s Reputation?

Essentially, forex brokers exist to make it easier for clients to link up with banks that are selling and buying currencies. At the same time, forex brokers are still governed by sets of rules and specific required processes. Years ago, the industry was not regulated and even though developments in this area have improved dramatically, the potential of running into some unscrupulous forex firms still exist. One way to check for a forex brokers’ legitimacy is go to The National Futures Association’s website.

If you are a newbie to the industry, you must be very careful with how you proceed. Forex products carry high risks and these are not suitable for everyone. If you are not careful or inexperienced, you may really lose all your hard-earned savings delving in this business.

If you remain unsure with which forex broker to go with, you can always go online and use a broker finder tool to compare forex brokers.