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Forex Brokers

Updated on February 8, 2016
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Philip retired from investment banking to write. To date he has written 9 books on trading forex, 3 short stories, and one poetry book.

Forex Brokers as Part of the Forex Trading Process
Forex Brokers as Part of the Forex Trading Process

What do Forex Brokers do?

Forex brokers or foreign exchange brokers provide traders and investors with information on the foreign exchange markets, foreign currencies, and micro and macro economic analysis, so that they can buy or sell on the foreign exchange markets. These brokers are usually part of a full service brokerage firm and are qualified in their areas of expertise and services they offer.

Forex brokers are qualified to trade in various currencies and forex rates so if you use a broker you will be able to trade on any exchange. These brokers are familiar with all the terms, conditions and rules established by the various exchanges for trading their currencies. Forex brokers appreciate how to reliably and accurately swap between various currencies depending on global market conditions. Being able to exchange and swap currencies while trading provides investors with wider investment opportunities as well as a range of commission opportunities for the forex broker.

Commissions and Services

Forex brokers receive a commission which is paid through the spread that is offered by the brokerage. The spread is usually measured in pips, which is the difference between the value of the bid rate and the value of the offer rate received. This commission can vary quite a bit as the bids vary in monetary value therefore there is no minimum or flat fee associated with foreign exchange transactions.

It is important that your forex broker provide stop losses as a service and that they guarantee these stop losses so as to minimize your investment risk. If your forex broker offers stop losses it is advisable to find out what the fee includes and their overall charge for these types of transaction. Determine whether the advice they are providing is helping your investments or hurting them. If it is endangering them then it might be in your best interest to find a new broker.

Another significant service your forex broker should provide you is something called slippage. Fundamentally slippage is when the price you request as compared to the price you actually get during your trade differs. If you are experiencing an unnecessary amount of slippage with your current broker, then you would be wise to select a forex broker with more experience.

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