A forex broker is a financial institution that offers traders access to an exchange for trading in various foreign currencies. Forex is short for international exchange. Transactions in the free marketplace are typically between two different currencies, although a forex broker can also refer to be premium forex brokers with zar accounts or simply a retail forex broker. The main forex trading is done in the US Dollar against the Euro and the Japanese Yen.
Major banks provide some of the funding for forex brokers. Traders use major banks to purchase currencies they plan on trading. In turn, these banks provide the funding for the transactions. For example, a major bank in Europe may buy Eurozone currency to sell it in the UK.
Major financial institutions have been the primary providers of forex trading information for years. However, now with the internet and changes in technology private investors and even individual traders can access this information. This information can be very useful for traders who want to make informed decisions about which currencies to trade.
There are two types of forex brokers. Full-service brokers provide traders with global exchange and also provide information on the pairs of currencies that they trade-in. These include major world currencies such as the US Dollar, the British Pound, the Euro, the Japanese Yen, and the Swiss Franc. Discount brokers on the other hand only trade in a few specific pairs including the Euro and the Australian Dollar.
Regardless, of which type of forex broker you choose you will need to open an account.
An account with any forex broker allows you to trade in many different currency pairs for the same price. When you first sign up with a broker, they will deposit your initial funds into a “wallet”, which you then use to buy/sell currencies from their list of assets.
Many forex brokers will offer several free currency pairs to start trading with; however, most will not offer any free assets. This is important to know as there are many more brokers that will offer free currency pairs but will then charge you a fee for any pair that you trade-in.
It is best to find a forex broker that offers a demo account. A demo account allows you to practice trading without investing any money, so you can see how much the transactions are like before you make any actual investments. Many brokers will provide you with a demo account for some time, either for free or for a small fee.
The fees for these demo accounts are generally not very much and are generally only a few cents per trade. It is important to take advantage of demo accounts to get the feel of Forex trading before you make real investments.