The mediator between the retail and the whoelsale forex markets is called the forex broker. They allow retail traders to interact with the existing market and be compensated for their services through what they call “bid-ask spread” – the difference between the prices a trader shall accept to and the price he must pay to buy a currency. The forex broker is also the mediator between the retail and wholesale forex markets. Wholesale markets are composed of similar large institutions and banks, while the retail market only includes individual traders who are looking for to acquire hypothetical gains. Forex brokers will have their own staff, trading the market on their behalf but are not considered traders.
Because some forex traders encounter misfortune very often, brokers make their best effort to protect themselves. First, they made sure they clear out the positions of their clients with entries on the opposite side. Since a huge majority of forex traders lose money, by entering the other side they usually make profits. Brokers also protect themselves by mobilize margin calls in case their client’s account value falls below the margin requirement.
Forex trading is a sure money- making career for a committed person. A trader should not only screen the forex brokers list but have to make sure he/she should closely examine if the broker will become a perfect and excellent partner. Finding the right broker was not an easy task at the beginning of the forex business it is because the retail trading was not regulated as the authorities did not obtain the background and expertise for competent control. Through the years, the government founded variuos regulatory bodies which include the BaFin in Germany, FSA in the U.K and the CFTC (Commodity Futures Trading Commission) in the U.S. They make sure that there is always a healthy, legal and competitive atmosphere in the market. They also protect the public and market users from fraud, manipulation, and abusive practices by maintaining strict rules of the business. Therefore, one of the most crucial parts is to make sure that beginners have chosen a broker who is being governed by the relevant national authority.
To sum it up, today’s law do not secure nor protect the forex trader the same way that stock traders are protected. Stock brokers who opened an account online are generally protected against broker downfall by up to $100000 and yet no equivalent protection was given for forex traders.
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