Acting as an intermediary between buyer and seller a broker is an individual or firm. Forex brokers are firms that deal in foreign exchange. Except that, typical Forex brokers do not charge a commission, the foreign exchange market is quite similar to the equity markets. However, Forex brokers are required to have a license.
On the basis of the spread, they charge FX brokers can be compared. To allow the investor to compare the spreads, most Forex brokers publish live or delayed prices on their websites. It is, however, necessary to check if the spread is fixed or variable. When the market is quiet variable spreads appear small and attractive, but the Forex broker widens the spread when the market gets busy, meaning that the investor will gain only if the market is favorable.
Forex brokers like the FX broker in Australia are usually tied to large banks or lending institutions.
Factors to Consider when Choosing One
Any reputable Forex broker should comply with the rules made by the regulatory authorities. In the United States, the broker you work with should comply with the National Futures Association (NFA), Futures Commission Merchant, U.S. Commodity Futures Trading Commission (CFTC) and the Retail Foreign Exchange Dealer. As you know that he/she can’t run with your money a broker like the FX broker in Australia who is regulatory compliant gives you peace of mind. You also know that as there is a regulatory authority overseeing its operations the firm can’t engage in fishy business. As rule of thumb, you should never work with a company that isn’t compliant with the regulatory guidelines.
You need to execute the trades on your own while you will be transacting through the broker. This calls for you to pay close attention to the trading platform used by the Forex broker. The trading platform should be easy to use. Go with a platform that has a community base where traders can exchange ideas and share their experiences to make your work easy.