What Is A Broker In Forex?

A forex broker is the link/connection between you & the online forex market.

Please take note of the word “online” because we are referring to online forex brokers.

What Does a Forex Broker Do?

A forex broker owns & provides the currencies you speculate on, so that all you have to do is bet on if the exchange rate will rise or fall (without owning the currency).

Forex brokers give you the exchange rate for each currency pair because they get these rates from liquidity providers such as big banks & multinationals.

Forex brokers also deploy mobile apps, desktop trading platforms, servers, etc. to ensure your connection to the online market is uninterrupted.

You cannot trade forex online without a forex broker because as an individual, you lack the huge capital to set up structures for trading hence you must pass through a forex broker.

Types of Forex Brokers

Dealing Desk Forex Brokers:

Dealing-desk forex brokers are brokers that determine both the price you buy at & the price you sell for. They basically take the opposite side of your trades.

They make more of their money from spreads and they focus less on commissions.

Their spreads are usually higher than average because they collapse the commission into the spread.

The advantage of dealing-desk brokers is that they execute small orders fast because they don’t have to wait for several small orders to accumulate before they execute.

Their disadvantage is that their spreads are always higher and thus your trades take longer to become profitable because of this.

The dealing-desk pricing system is also unsuitable for certain trading strategies that require low spread pricing.

Pros	Cons
✅Small orders are executed faster (Instant Execution is possible)	❌Spreads are higher
✅Better liquidity	❌spreads are less transparent
✅Require stiffer regulation	❌Unsuitable for high volume traders with big accounts
	❌Unsuitable for algo trading with robots & EAs

Non-Dealing Desk Forex Brokers:

Non-dealing desk forex brokers don’t determine prices instead they let the liquidity providers (such as Banks) determine the prices.

They offer raw spreads (which are very low) so they focus on making their money through charging you a fixed commission per trade.

Non-dealing desk brokers don’t trade against you & their pricing style is more transparent.

They connect you directly to the liquidity providers on the other side using special Electronic Communication Networks (ECN).

The advantage of non-dealing desk forex brokers is that since their spread is low, it takes your trade a shorter time to reach profitability.

Another advantage is that when you trade in large volumes you get rebates on the commission.

The disadvantage is that smaller orders may not be filled quickly & at a good price.

This is because the broker may have to merge them with other small orders to make up a big order before executing.

Pros	Cons
✅Lower spreads	❌Small orders may not be filled at a good price
✅More transparency	❌No instant execution
✅Ideal for automated trading using robots & EAs
✅Ideal for scalpers

Which Broker is the Best for Beginners?

The best forex broker for beginners is one that meets the following criteria:

What is Minimum Deposit in Forex?

The minimum deposit in forex is the smallest amount your forex app will allow you to input when making a deposit.

Every time you make a deposit, the amount must not be lower than your brokers specified minimum deposit.

For a beginner, always check the minimum deposit for the account types you want to open. Usually spread-only trading accounts always have a lower minimum deposit than commission-based trading account types.

What is Customer Support in Forex?

Customer support in forex trading refers to how you can get in touch with your forex broker.

The first thing you need to check is if the customer support is available 24/5 or 24/7.

24/7 customer support means the support agents will be available all days of the week (including weekends).

24/5 support means the support agents will only be available on week days.

You also have to check the available channels through which you can reach the support agents.

Usually, the fastest way to contact a forex broker today is via live chat. Hence it is important your forex broker has a live chat service.

Also check if your broker has toll-free telephone lines & a registered office near you.

Today, forex brokers assign Personal Account Managers to their account holders, so check if this is applicable with your broker.

Personal Account Managers are useful because you can reach them at any time & they are mandated to resolve any issues you face.

What are Trading Tools in Forex?

forex trading tools are those features in the brokers trading app or platform, that make it easy to use.

Some brokers shy away from developing useful trading tools for their apps, hence leaving beginner traders unprepared to face the market.

You must check the brokers app for useful tools like Line Drawing Tools, Custom Order Entry, Economic Calendar, Fibonacci Retracement Tool, Risk Calculators, etc.

Forex Education & Learning Support

Your forex broker should provide tutorial videos on their apps & platforms so you can learn how to trade forex on your own.

Your broker should also provide a Demo Account on their trading apps, so you can learn forex trading using fake cash. Demo accounts are for experimenting in a simulated environment.

Free Bonus on Deposits with Your Broker

The best forex broker for beginners should also give free bonus on any deposits you make (especially your first deposits).

This deposit bonus helps add to your trading capital and makes you less nervous when placing your first trade.