The Business of Forex Brokers

New investors looking to start making money on the foreign exchange market will find that they need to invest through Forex Brokers. These brokers are retail traders with experience making currency trades on the forex market and who have the skill necessary to understand the rules of the forex market and help their clients navigate the ins and outs of this world wide market.

Most forex brokers deal with their clients either over the phone or through the internet. They rarely have face to face meetings with clients simply because it's easier to get business done and take orders through other means. It also allows them to handler more clients. It's entirely up to the broker to decide when and how much money each client needs to invest in each trade. Lots of online brokers allow clients to invest for as little as $25 on a margin. Some brokers will allow their clients to choose when they want to make a trade or even what time they want to pull out of the forex market with their money. Other brokers set specific time periods when their clients can make trades. Its really quite variable, so new investors in the market should really take their time to find the best forex broker for their needs. The most common type of trade offered by forex brokers and perhaps the simplest to use is the standard option contract traded over the counter (OTC). This type of trade typically involves trading a pair of major currencies, such as the US dollar, and the Eurodollar. Or the US dollar and the Japanese Yen. Often this type of trade is only made by brokers over the phone, because clients tend to have less control of phone orders, the phone broker may limit his or her clients to a few kinds of trades for simplicities sake.

Many forex scams, as is common with other types of scams, rely on getting dollar signs to appear in their victims eyes in order to pull off the scam.

These kinds of brokers are often referred to as plain vanilla brokers. Any forex broker you choose will take a commission for each trade you order through them. This is basically how they make their money. A good forex broker will be associated with the Commodity Futures Trading Commission (CFTC) and will be registered as a Futures Commission Merchant (FCM). If the broker you are looking at doesn't have these credentials available then you should probably look at some other broker. Also a good online broker will always have the option on instant automatic trades. The forex market is open 24 hours a day, excepting the weekends, so there should be very little delay in trading.

Ralph Nunes's Forex Free Guide website offers articles, tips and updates on Forex Trading. To find this and more, check out his website at:http://www.forexfreeguide.com/

Beware of the Typical Forex Trading Scam

It's very easy for new forex trading investors to get taken in by some sort of forex scam or another.  This can include just about any idea under the sun that scammers can come up with.  Usually the realm of forex scams can include, software and e-books that 'guarantee' a profit in the forex market, an unscrupulous market maker that spikes costumer accounts so they can get their fees, general false advertising, and even those with fake sites that just take your money and disappear.  

  The nature of the currency market tends to leave new investors vulnerable to such scams, simply because it fluctuates a lot and little is known about the market by the general population.  It's up to investors to educate themselves on forex trading, just as they would before making any other investment if they expect to do well.  This includes being aware of common scams.  In 2001 the US Commodity Futures Trading Commission (CFTC) released nine tips investors in the forex market should keep in mind when looking for a broker:   Stay Away From Opportunities That are Too Good To Be True Avoid
Any Company that Predicts or Guarantees Large Profits
Stay Away From Companies That Promise Little or No Financial Risk
Be Wary of Trading on Margin Unless You Know What That Means
Be Wary of Those Claiming To Trade in the "Interbank Market" because Its 'Safer'
Be Wary of Sending or Transferring Cash on the Internet,

By Mail or Otherwise Scams Often Target Members of Ethnic Minorities Get the Company's Performance Track Record Anyone Who Won't Give You Their Background Isn't Worth the Risk

Many forex scams, as is common with other types of scams, rely on getting dollar signs to appear in their victims eyes in order to pull off the scam.  If at any point in the decision making process you start to feel yourself getting overly excited by the prospect of making what seems like easy money, then set your plans aside for the time being and come back to them later.  You'll be much calmer and in a better position to decide if the broker or deal you are interested in is really worth it.

One of the most common scams simply involves selling a product or system online that will 'guaranteed' make you profits in forex trading.  Be careful of online advertisements for these products, after all most of them contain information about the forex market that you can obtain by reading any other book on forex trading.  It will give you information on the forex market if you are doing research, but it probably won't give you the guaranteed secret to success.

Ralph Nunes's Forex Free Guide website offers articles, tips and updates on Forex Trading. To find this and more, check out his website at:http://www.forexfreeguide.com/

 

The Decision to Use A Forex Automated Broker

It is becoming increasingly popular to trade in the forex market using automated forex brokers.  These are firms or companies that operate websites online to offer easy access to instant currency trades for their clients.  These automated brokers are instantaneous so the clients don't have to worry about the value of the currency they are choosing changing negatively before they have the chance to complete their transaction. 

         

Going automated is extremely good for the brokers for two reasons.  It helps to bring in more clients and from there they get more commission. Also the automated system saves brokers a lot of time.  The old way of taking orders was usually by phone and a broker had to do a lot more work with this method.  By going automated the broker saves themselves the effort of handling phone calls, research prices and seeking out new clients.  They only have to maintain the website and its accounts, and perhaps order some advertising for new clients.   New clients using an automated broker will also find that they have more options in making trades with their currency.  A client isn't limited to trading with only one kind of currency in one time zone.  Since its online the client can trade in multiple currencies, multiple time zones, over a matter of seconds.    Plus many online brokers will have useful charts and the most current information on the values of currencies in the forex market available to their clients in the matter of a few clicks.  Many automated brokers make it very easy to get into the forex market via their websites.  Registration usually takes only a few moments and the new client can transfer money into their account in moments with a checking account.  There are some automated brokers that let new clients jump right into the forex market for only $25.   Another plus in using an automated broker is that the client can truly take advantage of the 24 hour forex market and make a trade whenever they like, be it noon or midnight.  There is no need to worry about waking up the broker with a phone call because the system is automated and all your transactions are completed online.   Automated trading has become available only in recent years through the development of the internet and several business technologies.  Its made it possible to have real time trades with a small amount of money, whereas previously it was impossible to enter the market without lots of money to invest.

Ralph Nunes's Forex Free Guide website offers articles, tips and updates on Forex Trading. To find this and more, check out his website at:http://www.forexfreeguide.com/

How to Read Forex Quotes Correctly

Reading forex quotes correctly is essential to forex trading but it can be quite confusing for the new comer. Actually, they are quite simple to read and understand. Here is a guideline to reading forex quotes correctly.

Let us look at an example of how a forex rate quote looks like:

EUR/USD = 1.2526

The above looks simple enough, right? This is an example of a foreign exchange rate between the Euro and the US Dollar.

Do not forget that in all forex quotes, there are always two currencies quoted. The forex quote is displayed such because when you make a trade in forex trading, you are always buying one currency and selling another at the same time.

In all forex quotes, the first currency listed is known as the base currency while the second is known as the quote currency. Forex quotes are meant to show us the price relationship between the two currencies.

The foreign exchange rate gives us an indication of how many units of the quote currency we have to pay to get one unit of the base currency.

The above example shows us that the base currency is the Euro and the quote currency is the US dollar. The forex quote tells us how each currency is trading relative to the other. In order to purchase one unit of Euros you will have to sell 1.2526 units of US Dollars.

It should be easy to understand so far. Now let's add an additional thing to our example and that is the bid ask spread.

Forex brokers are paid not on the trades placed in the forex market but on the bid/ask spread instead.

We shall add the bid/ask spread to our example above:

EUR/USD = 1.2526/1.2528

This can be simplified to:

EUR/USD = 1.2526/8

Forex brokers make their commissions by selling currencies at a slightly higher rate than they buy them. This is perfectly legal and all forex brokers do it, though the amount of the spread may vary.

As a forex trader, you will be buying at the bid price, which is the first price quoted. You will then sell at the ask price which is the second price listed. This difference between the two prices is called the spread which is retained by the forex broker as their profit on the trade.

In our above example, you will buy at 1.2526 and sell at 1.2528. The 0.0002 (2 pips) will go to the forex broker as a payment for executing the trade for you.

The bid/ask spread is an easy to understand and clear-cut way for calculating trading fees and expenses.

With a good understanding of how to read forex quotes correctly, it can go a long way in helping you achieve success in forex trading.

Duncan Lee is a fulltime forex trader with over 4 years of experience and has helped countless amateurs turn professional. Visit the official site and grab an Insider's Special Report worth $47 for FREE!: Forex Trading Course

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