Usually, a forex broker will provide you with the bank's prices and they get forex liquidity through their line of credit. Many forex brokers will use multiple banks' prices to make quotes to give forex traders the best offer they can to attract clients.
Accounts
Opening a forex trading account is similar to opening a bank account, without having to go to a physical premise. The majority of forex brokers have an online presence and advertise their services to existing and potential clients. Traders can easily carry out the account opening registration in the comfort of their homes and even on mobile phones – usually in these simple steps:
1. Filling in personal data.
2. Identity verification.
3. Answering some questions about their trading experience.
4. Funding the trading account.
Sometimes it takes a few hours to a few days to get up and running – depending mainly on the ID verification process and the funding method used to deposit the funds.
Many forex brokers offer demo accounts and require very little information to open one of these accounts. This demo or practice account will allow you to set up your account to practice until you are ready to start trading live.
Leverage
The ability to use Forex leverage depends on the individual account and can range from 1:10 to 1:1000.
1:10 leverage means that for every $1 in your trading account, you can trade up to $10. However, leverage is a double-edged sword. You could use it to make exponential profits, but you could also blow your account very quickly if you overuse it recklessly. Many traders would end up blaming their forex broker for such hasty trading behaviour and report them as scams. Therefore, forex brokers are required by law to highlight this matter and it is usually mentioned in the contract.
Account Balances
When you trade through a forex broker, there are two account balances. One is your actual balance, not including trades that are not closed. And the other account balance is the balance you will have when you close all your trades, which is known as the net balance after taking into account the profits/losses from the last closed trade.
Spreads
When you start trading forex through a broker, they transmit the price to the market for you. During this process, the price they offer you will be somewhat different from the price they can get. This difference is referred to as a spread. From a trader's point of view, the spread is a trading commission that mostly makes trading transparent. It is also beneficial for a trader to look for a broker that offers the lowest spread possible in order to increase the chances of making profits and minimizing losses. However, you have to remember that from a broker's perspective, this spread is based on the size of your leveraged trade, not the size of your account balance.
Now that we have outlined the characteristics of a forex broker, the next million-dollar question would be “how do we choose a forex broker？”
With so many brokers who are competitively offering a myriad of deals and accounts, not to mention fake information that is being widely spread over the Internet, choosing a forex broker is often a time-consuming and overwhelming task, especially for beginner traders.
WikiFX is a global forex broker regulatory query platform that carries verified information of over 35,000 forex brokers from all over the world while collaborating closely with 30 national regulators to ensure the accuracy of all the provided information.
Users are able to enjoy all the specially curated features of WikiFX for free at www.wikifx.com or by downloading the free mobile application on Google Play/App Store.
WikiFXs search bar is your best assistant.
Type in the name of your chosen broker into the search bar as shown above. We will be using the forex broker named IC Markets as our example in this article:
WikiFX presents you with the full profile of that forex broker. Here you can see that IC Markets has achieved a high WikiFX Score of 9.19 out of 10 after WikiFXs strict review process in terms of risk management, software, license, regulatory, and business. Information regarding the establishment of the forex broker is also clearly listed, coupled with field survey documentation.
Click on the Comparison button as demonstrated below for more interesting features:
This ‘broker comparison’ tool allows you to compare several forex brokers simultaneously.
Users are encouraged to opt for forex brokers that have relatively higher WikiFX scores to ensure their credibility and safety.
After you have put in the names of your selected brokers, click on the blue button that says ‘Start to Compare’.
Another window will pop up with all the relevant details regarding the brokers, such as regulatory status, platforms offered, trading environment and transaction speed, the transaction cost of major currency pair/commodity, accounts offered, and trading instruments available.
