What is a broker? What does the broker have to do with the trader?


Forex brokers are parties, can be companies, institutions, agents, or individuals where they stand to bring together sellers and buyers. 

Then what products are transacted? Of course in the form of forex (foreign exchange) or foreign currency.

In trade activities between countries, there is a currency exchange. This exchange has been going on for a long time when economic relations between countries began to be tied to each other.

So arguably, forex brokers have existed since time immemorial. Seeing the increasingly massive development of economic relations between countries and the rapid growth in the forex market, of course forex brokers are increasingly in the world.

In fact, forex trading activities are dominated by large banks throughout the world. Transacting directly with these big banks is almost impossible for individual traders.

In addition to having to have a liaison, transactions with large banks also cannot be done in small amounts. In other words, the standard of practical transactions is beyond the reach of small-scale traders like us. Well, this is where the forex broker takes part.

The forex broker will arrange for each individual trader to participate in forex trading. Brokers will forward requests from traders to larger brokers, and so on so that later every trader request can be accommodated in the large and massive foreanywhere, anytime.

Each broker has different rules in attracting fees for their services. But in general, forex brokers earn profits from charge commission fees and or spread.

Commission fees are deductions in the number of dollars charged on each volume traded by the trader. Whereas spread is the difference between the selling rate and the buying and selling rate (bid and ask).

There are forex brokers that enforce both, but there are also only those that only set Spreads, or Commission Fees.

Usually, the spread size depends on the type of currency pair to be traded. Spreads can be worth around 2-3 pips for heavily traded major currency pairs such as GBP/USD (Pound against US Dollar).

On the other hand, Commission Fees will vary depending on the type of broker.

In the old days before there was the internet, traders used the old communication model, such as via telephone, to make transactions to brokers.

But in today's internet era, almost all forex brokers must facilitate online trading so that the trader is not left behind and is considered outdated.

With the development of this technology, there are many conveniences that traders get. Besides eliminating the difficulties of pre-internet trading and allowing transactions anytime and anywhere, traders can get real-time trading facilities.

With a special advanced application like Meta Trader, traders can monitor prices and carry out order execution directly on the trading platform.

In addition, traders are also facilitated with a variety of tools for analysis, news access, and much more.

Regulation and Legality of Forex Brokers

The problem that then arises is how to choose a forex broker among hundreds of online forex brokers around the world.

When there was still little, the choice of the brokers was very limited, so there was almost no demand for traders to be selective. But with the growing global interest in forex trading, new brokers have emerged with various types, advantages and disadvantages.

There are good brokers, but there are also those that need to be watched out. Some work professionally, some eat funds from their own clients. Such a situation needs to be well understood so that traders are not wrong in choosing a broker.

One way that can help traders choose a safe broker is to find out info about the broker's regulations. Regulated forex broker means that he must follow the standards and regulations set by the relevant regulator.

Forex broker regulators are generally official financial institutions or institutions under the government of a country. The better the regulator, then the rules followed by forex brokers will be tighter.

Brokers cannot operate on a standard that is inconsequential, because there is a threat of punishment imposed if he violates the provisions of the regulator. Brokers can get a warning, be subject to sanctions, until the operational permit is revoked.

Now, which forex broker regulator is credible? In this case, institutions in developed countries such as the NFA (United States), FCA (United Kingdom), and ASIC (Australia) are often the main choices.
Generally traders do not care and may not know how brokers actually manage every transaction that comes from the client.

Traders can only guess from broker's claims and the quality of services they obtain. There are several types of forex brokers currently in circulation, but in fact all the various brokers come in two main categories: DD or Dealing Desk and NDD or Non-Dealing Desk.

Basically, dealer brokers operate with their own markets and do not display real exchange rates (prices) as presented on the interbank market.

Although still providing buy/sell execution options to traders, dealer bro are often suspected of manipulating. In fact, brokers can trade against their own clients because the profit also comes from the position of the losing trader.

A better choice is certainly a NDD broker. Here, each transaction will be forwarded to a larger bank or broker. The broker's profits really come from spread and commission fees, so there should be no trading terms against clients in NDD brokers.

In addition to the various types of brokers, there are also many frauds under the guise of a forex broker. For that, you need to be careful and really recognize the characteristics or signs of a scam broker, so as not to fall prey.

So the point is that traders need brokers to be able to trade forex because if there is no broker intermediary.  A trader must be a first billionaire to be able to trade with a lot of profit.

Well, because there is a broker, traders can now trade with smaller capital because brokers provide facilities in the form of margins or commonly known as leverage.

Well, because of that relationship, the broker is very important for traders to be able to help provide trading facilities. The point is that brokers and traders are things that cannot be separated.

The good news is that brokers are widely available, and many provide facilities in the form of small minimum deposits that can be reached by almost all groups, but the impact is that many brokers are found to be "cheating" so traders need to be careful.

In essence, if you choose a broker, choose a good reputation (usually, the broker's age is increasingly credible) and also choose a broker that has been regulated.