Forex brokers – what are they?

If you intend to start trading currencies, the indispensable step to make is finding the Forex broker. For those who are not yet sure about their role and importance, here is the explanation.

The role of the Forex broker

The Forex market is the place where buyers and sellers of foreign currencies meet. Currency traders need the mechanism and the facility to execute their trades. And that’s enabled by the trading intermediaries, which are Forex brokers. They are a stall representing the touch base between the liquidity providers – networks of banks, and the traders. If you aim to trade currencies, you must go through the Forex broker financial service, enabling access to the trading platform.

Foreign currency trading has been around as long as international trading. However, today it is under control by several large banks like JP Morgan, Dechebank, Citi, and UBS. The Forex market used to be the territory accessible only by big financial institutions and banks. But the recent technological advancements in online trading and brokerage have led to improved trading conditions for individual traders.

Liquidity providers

As mentioned above, your Forex broker is the touch base with the liquidity providers enabling you to sell and buy chosen currencies. These providers are big banks disposing of and trading a vast quantity of foreign currencies.

The Forex brokers pass their client’s trades to these liquidity providers matching your trading contract with the banks or other financial institutions to find the counterparty for your trade. As a result, the Forex market is one of the most liquid financial markets in the world, with trillions traded daily.

Trading platforms

Thanks to the advent of the internet, ordinary people worldwide can take part in currency trading. It’s enabled by special computer software and trading platforms.

MetaTrader 4 and MetaTrader 5 are the top-class software that most brokers use today. Meta trader 4 is primarily designed for the Forex market, while Meta trader 5 encompasses other types of trading instruments and assets such as stocks and futures.

Some brokerage platforms are based on one type of software, such as MT4, enabling only currency traders. However, many brokers are offering a mix of both software.

And finally, you can also stumble upon the proprietary brokers meaning they have developed their own software solutions. In general, all these trading platforms have a lot to offer in terms of analytic tools, copy trading, and many more.

Check out the Forex broker list to get an insight into what various brokers offer in terms of trading platforms and trading conditions.

Regulations

There are stark regulations regarding the Forex brokerage business. Every Forex broker must comply with the strict regulations imposed by the financial authorities in order to get a business license. There is no one single regulatory body but several of them in charge for different jurisdictions. The most important among them are The National Futures Association for the United States, Financial Conduct Authority for the UK, The financial services agency in Japan, Financial Sector Conduct Authority (FSCA) for South Africa, Cyprus Securities and Exchange Commission, and so on.