What is Forex?
Forex is an international currency market that operates 24 hours a day, excluding weekends. Forex trading is decentralized (does not have a specific location) and does not obey the restrictions of exchanges, since trade transactions are concluded by the parties directly through the telephone or electronic network.
Who works in the forex market?
Forex market participants are individuals and legal entities that perform transactions on the exchange of foreign currencies. The largest traders in the forex market are banks that handle large amounts of foreign currency in the process of buying and selling, for the purpose of investing and influencing the market value of any currency. Along with banks, trading companies operate in the forex market, the main goal of which is to profit from their transactions. Finally, the last major group of players on the stock exchange market are brokers acting in the interests of their clients. The source of income for a forex broker is the commission from client transactions or spread (the difference between the buy and sell price).
Basic principles of a forex broker
Brokerage companies operating in the forex market offer traders the opportunity to trade in the international foreign exchange market without actually purchasing currency. Brokers carry out such transactions using information about currencies taken from financial markets, while adding their margin (spread) to the exchange rates of the currency pairs being traded. The use of software is necessary to carry out the activities of a forex broker, since it serves as a virtual trading platform for transactions. The client (trader), in turn, has his own software, thanks to which he can analyze financial information and interact with his broker in the process of making trading decisions.
Forex brokers offer traders to trade a specific currency pair, however, due to the size of specific lots (a unit of measurement for currency volume), most forex brokers prefer to provide their clients with leverage. This allows forex traders to make higher profits, although the risk of possible losses can be equally high. Many brokers allow traders to use the Expert Advisors program within an established trading platform to help them make more accurate trading decisions.
Any trader should consider the following factors when choosing a forex broker: whether the latter has an appropriate professional license, and whether this license is issued by the regulatory financial authority of a particular jurisdiction. Trading through a licensed forex broker guarantees the trader some protection, as provided for by the laws of the country in which the license was obtained. You can always turn to the regulatory body with a complaint and a request to solve the problem, while using the services of an unlicensed broker, you are not insured against the risks of poor quality work or fraud.