The forex market remains one of the largest globally, with liquidity of over $5 trillion in one day. Due to the size of the market, small-scale traders don’t have direct access, and that is where forex brokers come in. They act as a bridge between traders and the markets. So, everyone wants the best forex brokers to have a good time trading. However, these top-tier brokers have some similarities.
Since they all operate similarly, there are several facts common to every forex broker. Let’s look at some interesting ones that you should not miss.
Brokers Don’t Control the Market
There is a stereotype stating that brokers control the markets, especially among new traders; it isn’t exactly true. Sure, brokers provide you with price quotes and allow you to place trades, but they don’t move prices.
The market is too large for you to individually plugin and place trades. Only big players that control very large funds can directly trade in the markets. So, to allow you to connect with the markets as an individual, your broker is your middleman. They access the markets and get price quotes that you see on your feed. So, when you place your trades, your broker helps you mirror them in the real markets. This process seems quite overwhelming, but it happens in only a split second.
However, your broker can provide wrong price quotes for their selfish gains. It is why you should place trades on only licensed and regulated brokers, as they would never do such; otherwise, they risk losing their license and credibility.
Your Brokers Need You More than You Think
You may not realize it, but your broker needs you just as much as you need them. If they have no traders on their platform, bankruptcy is not far away from them. Brokers utilize spreads to get their profits on every trade you place. It is one reason why, except your broker offers zero spreads, your trades always start on a negative. The negative means that your broker has deducted their share from it. So, irrespective of the trade outcome, whether profit or loss, they made their gain off you.
Now, you may wonder how brokers with zero commissions go about their business to make profits. The answer is commissions. Brands that offer zero to very little spreads usually charge more commissions, which is not a fixed percentage. Instead, they calculate it based on your lot size and how long you hold the trade.
Another way that your broker makes money from you is through swap fees. It is what they charge you for holding trades overnight.
Now you understand why your broker also needs you; you will never find one that doesn’t charge all these fees. The best you can find is brands that charge lesser but still not zero fees. If not, how do they make their profits?
Forex Brokers Don’t Want You to Lose
It is not uncommon to hear people tell you that every forex broker wants you to lose. While that may be true for some, the authentic ones don’t want you to lose. They don’t gain more when you lose, so why wish you bad? Either way, your trade ends, they always gain their profits through commissions.
When traders lose excessively, they get discouraged and begin to question the genuity of their skills. Some even quit in no time, and it is bad business for your respective brokers.
It is one reason why you see authentic brokers host different programs to encourage traders. While some offer education and trading lessons, others allow bots and copy trading. All these measures are in place to facilitate your using their platforms. If you connect all the dots, it won’t take you long to figure out that they don’t want you to lose.
Brokers Don’t Necessarily Trade
You may believe that forex brokers are master traders themselves. Some even believe that brokers trade against their customers. The truth is that they are not the market wizards that you take them for; in fact, most brokers don’t necessarily engage the markets.
Not all staff working with brokers understand so much about the markets. They are only there to provide trading services to you. And with the population of traders increasing, they have fewer reasons to interact with the markets directly. In addition, more players mean more commissions for these brands, which synonymous with more profits. So most brokers would rather focus on providing the best services to attract more individuals.
Wrap Up
Now you know more about your respective brokers, and they are not necessarily the evil masterminds many people frame them as. So far you have a reputable one; it is best to focus more on improving your trading skills. Most traders have a favorite pair that could be a good start for you. Your broker will be the least of your worries if you are making profits.
