This is a question that most of the new comer in forex market ask, there are so many common questions like, who are forex brokers? how can we trade in forex market? what is the purpose of forex broker, if we are doing direct deal etc. So, let me tell you something about forex brokers. Who are they are why they are necessary for retail traders?
Well, if you have decided to enter in this lucrative market and want to make some bucks with this market that may be an extra income that you may earn in your spare time, but that is far now, this is beginner guide. What forex broker are? Actually forex brokers are those companies and institutions that are active in market and those who have a lot of money to invest in market. The trading in market is not easy, if you are not trading with broker. Because you invest only a few bucks but the broker invest the rest of money in the market on your behalf, that is called leverage, he gives you leverage and you then trade in market to earn money.
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| Types of forex brokers |
Without broker if you are going to trade then you will have to invest at least one hundred thousand dollars for the sake of 1$ lot trading, because market runs with lots, and if you buy 1$ then it means that you are buying one hundred thousand dollars. The broker invest his own money and this is the rule of market. In return what he gets from you? He earns through delay, swaps, spreads and account maintenance etc.
There are two type of forex brokers I know in forex market, one is direct dealing desk broker and other is non dealing desk brokers. The difference between in these two brokers, if I tell you in simple words, then one give lives market rates each second and other gives market rates that may differ from original market rates.
As you can see in this picture, that No dealing desk has STP and ECN Plus STP, and Dealing desk are market makers.
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