Can anyone explain what is a forex broker?
good way to explain well doneA forex broker is a company that offers people who want to trade currencies and other assets the chance to do so through their services. Forex brokers offer financial services to traders and thus they act as a portal for traders to enter and trade in the forex markets.
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Forex brokers enable their clients to trade through a platform that the broker offers. Many forex brokers offer their trading services through the famous MT4 platform, or its more recent version MT5.
Forex brokers often are connected to banks or market makers who provide liquidity and help execute the transactions for traders through the broker. Some brokers are connected to more than one bank and thus they can offer better prices, i.e. lower spreads for traders. If those brokers offer contracts for differences (CFDs) only, they don’t need a liquidity provider to execute the trades.
Some forex brokers claim that they make money only through the spreads, i.e. the difference between the selling price and the buying price of any currency pair (the difference between the bid and the ask). Others make money through both the spreads and by charging commissions on transactions. Forex brokers can also make money by charging fees on deposits, withdrawals, and even inactivity fees in some cases.
To establish some degree of trust with clients, forex brokers should obtain proper licensing from the competent regulator in the jurisdiction they work in. The regulator usually performs regular audits on licensed brokers, to ensure they are following the regulations, such as separating clients’ funds from their operational funds.
It is usually the client’s responsibility to check that their broker of choice is licensed. It's worth noting that a significant number of brokers are either under-regulated or completely unregulated. This does not necessarily mean that the company is bad, however, it significantly limits the options of the trader in case of the conflict.
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