How Forex Brokers Work

Like everything else in the history of the company, your broker's purpose is to maximize profits. There are about as many ways to do in this case brokers. For those who have long term, it is usually best to determine a set of practices that are regarded as fair by their customers: some limits to be set after the operation and could cost them a commission to his reputation, and with her clients . Stray outside these limits are not considered compatible with the long-term business. How these boundaries are strictly enforced, especially if there is little chance of even a customer ever aware of any violation, going back from Business to Business. For simplicity, in this article, we assume that everyone in the company is spotless, as if every customer could look in the back office of the agency at any time and analyze each transaction. This is obviously not the case, and many agents do not benefit from this opacity, but the details are best left for another discussion.

So without further ado, let the details of how the Forex brokers function. Slightly removed from the top-tier inter-bank market, the retail forex brokers are there for a service that would otherwise not be available, that is, giving an investor with a $ 10,000 bankroll the opportunity to speculate on the up - to - Forex market exclusivity soon. It is generally considered to be 2 types of agents with access to the retail level: electronic communication networks (ECNs) and Market Makers. ECNs are generally more exclusive, with a deposit more work but are considered more direct access to the interbank market. As we shall see, there are certainly advantages but also some disadvantages. Market makers, on the other hand, more often than not, the counterparty to transactions of their customers, creating something interesting, while earnings ECN fees charged directly to customers, regardless of the outcome of a business, they are regarded as entirely impartial - an ECN does not encourage a client to lose money. In fact, we can say that ECN means more profit as a customer is successful, which means he / she will stay longer and they will be able to collect more fees from them. A market maker on the other hand, if the counterparty to the trade for a customer makes money if the client loses money, it is a stimulant for a number of questionable practices, particularly in a unregulated market. The extent of this varies between individual agents. There are also some advantages to trade with a market maker (see our article ECNs vs Market Makers's) Some brokers also a service that does not quite fit one of these categories - this route several orders otherwise, be under Subject to complex algorithms, or to a treatment agency, and attempt to fill all orders in the manner most beneficial to the bottom line of the Agency to analyze. They can offset some client orders against each other, creating in effect an in-house market, they chose May to return to the trade for a customer (trading 'cons' customer), or they may cover their position with an offset from an upper-tier counterparties. Note that the market maker mainly engaged in managing its exposure, with craft and not a single individual. They are NOT Award for your specific stop loss, but could Award for clusters of cases.

If you have the first article of the series, read the structure of the Forex market, you will recall that the market mechanism is responsible for the change in the buying and selling, and also drag. Pet Peeves it seems that the two largest emerging entrepreneurs "are not so according to their broker, but their lack of insight on how does the foreign exchange market. The broker has a fixed margin does not tend to fill orders during periods of low liquidity because it would expose them to unnecessary risks, and provided that their job is to respond to their customers, remember that they are in business primarily to make money for themselves. Some brokers offer guaranteed orders are executed, such as "stop loss guaranteed. Again, if no part of the market to others, they run the risk of assuming that guarantee, so do not be surprised if you mention such a broker / delayed price around major trend lines or support / resistance levels. Be especially aware of brokers who offer both fixed spreads and guaranteed fills. If a broker something seems too good to be true offer, you would be wise to ask exactly how their business model is capable of doing such risky practices. Typically, a broker can help if your interests are aligned with theirs. On the other hand, brokers provide a valuable service, without which you do not have the opportunity to enjoy the forex market, think about how all this combines to blame your broker for all.