A Beginner’s Guide To Forex Brokers

forex brokers

Taking your first step into the forex market is always a challenge in itself. Understanding the functioning of the market and getting a grasp of the trading concept and technicalities surely take some time. But one crucial decision that you have to make as a beginner is choosing the right forex broker. This decision will have a major influence on your trading journey and experience as a whole. So, you need to consider several options and variables before opening a trading account with a forex broker. Today, you will be able to educate yourself about forex brokers and the role they play in trading by reading this beginner’s guide.

What Is a Forex Broker?

We do hear the term forex broker a lot while trying to explore the forex space. But many of us may not have a clear idea about what it actually means and why they are important for trading with satisfaction. So, this is a basic question that needs to be answered before moving forward. In simple words, a forex broker is an intermediary between the forex trader and the forex market. You cannot access the forex market without opening a forex trading account with a forex broker of your choice.

But the forex broker is much more than a middleman in the trading process. They will be functioning as a connecting link between liquidity providers and retail traders which is essential for a smooth trading experience. They will be working in the background to make the currency pairs available for trading at best prices. They will also be charging a fee for this service in the form of spreads and commission. The forex broker integrates a popular trading platform to their website, enabling the users to trade directly through the broker platform.

The forex broker is also in-charge of handling your funds or trading capital. You will be placing trades through the trading account registered with the forex broker. Hence, you will be trusting them with your hard earned money. So, this sums up the relevance of finding a reliable forex broker as the trust factor is very much needed to engage in trading activity.

Regulated Vs Unregulated Forex Brokers

Now another term that we often hear in relation to forex brokers is regulation. There are basically two types of forex brokers: regulated and unregulated. Regulated brokers are the ones who are registered with a regulatory body with a valid licence to function as a forex broker. The regulated body will be keeping an eye on the broker to ensure that they are operating within the legal boundaries. They also have to meet the criteria set by the regulatory bodies for earning and maintaining the licence throughout. That is why many traders tend to look for regulated brokers to carry out their trading activities as they are safer in comparison.

On the other hand, an unregulated or offshore forex broker is not regulated by any such authority or regulator body. They are independent and are not answerable or obliged to meet the requirements set by forex regulatory bodies. But this does not mean that they are illegal or cannot be trusted. Many forex traders prefer to trade with offshore brokers as they tend to be more flexible in some aspects. But for a beginner with no prior knowledge or experience in the forex market, opting for a regulated broker would be more ideal in our opinion. However, you are free to choose any broker that suits you as a trader and can proceed after ensuring that they are legit irrespective of the regulatory status. Read More