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Brokers... how do they work?

Discussion in 'General Forex Talk' started by Raevyn, Oct 13, 2010.

  1. Raevyn

    Raevyn Recruit

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    All of this talk about the CFTC has made me start wondering.. how exactly DO brokers work? Like, where do they get their currency trading prices? And, how do THEY convert currency? For example, to change a dollar to a peso, I go to bank that converts it for me. Most brokers are not banks so, do they have a bunch of bank accounts as different currencies to give and take from?

    I am just wondering if anyone knows... there are a HUGE number of brokers out there so it doesnt seem like it would be really difficult to set up but besides obviously meeting regulatory requirements.. like banks in the US are WAY easy.

    Oh well.. ideas or thoughts?
     
  2. RahmanSL

    RahmanSL Major

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    The explanation on the mechanics of Forex Trading is not short nor easy to write. Anywhere, there are ample writings on Forex Trading in the internet (all for FREE yah!)...so simply type "Forex Trading" and do a google search.

    As reference, I visited 100Forex Brokers when I first started out on my Forex journey and I have found this site to be especially informative.

    Good luck on your journey....and have fun along the way; yah!....just don't pay a single cent to any so-called "Guru, Expert Adviser, Paid Signal Providers, etc" who all profess to be successful Traders. Just remember that if a Forex Trader is so successful, why bother to charge money (and waste precious time) for his/her "expertise" when he/she can be making millions from trading forex??

    The Forex Market Daily trades is over 3 trillion USD; yah!...
     
  3. Raevyn

    Raevyn Recruit

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    That looks like a nice site for broker information but all I see is information about the brokers.. not really how they work. Maybe I am not seeing it? I will keep checking it though if nothing else but because of the information it DOES have! Is there any other source you or others know of? Google searches turn up sites that are not really about how they work, just about brokers in general.

    I have to laugh though... there was a poll on there about the 50:1 leverage and something like 66% of people are moving offshore to trade!
     
  4. RahmanSL

    RahmanSL Major

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    I have a bunch of Bookmarks on my computer which I had "bookmarked" from the start of my forex journey. I must have bookmarked them for some reasons or that I think they were relevant.

    1) The complete forex trading education project (hosted by Sir Pipsalot)
    2) FXINTEL (Live Broker Comparison Intelligence and Social Trading)
    3) PipHut.com (Free forex signal and analysis
    4) forex4noobs
    5) forex nation
    6) Surfing the pips
    7) donnaforex forum
    8) Best online forex brokers
    9) myfxbook
    10) FxOPen forum

    There are, of course, many2 more sites out there, but I must have bookmarked these particular sites for some reasons or that I think they were relevant.

    All the best in your learning experience and remember to have fun while you are at it!
     
  5. Earl Hayek

    Earl Hayek Recruit

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    an attempt at the tip of the iceberg

    Hi Raevyn,
    First of all, RahmanSL has an extremely valid point - "The explanation on the mechanics of Forex Trading is not short nor easy to write!" But let me try and simplify the basics as much as I can...
    It helps to think of the broker as fresh produce stall owners - in order to stock their stall they go to the big farms (i.e. the world's top major banks) and look for the best prices for each produce (i.e. chose the best price for each trading tool).
    The private traders are like the end consumers at that giant swap market. You enter the swap market with a bag full of $$$ (just like you open a live account with your broker, the currency of your account will always stay the same) and start playing with all the different fruits. When you want to leave the market (i.e. close a position or your account) you pass through the main register and the worth of your produce is once again calculated against the $.
    So basically the conversions are kind of virtual in the sense that only the value of the product is converted and not the product itself.
    Of course, this is extremely simplified and if you feel like you need more just google "forex education", you'll get plenty. Personally I like investopedia.com (great theory articles) and "CurrencyCollege.com"(great practical tips).
    Good luck and happy tradings :D
     

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