The basis behind using technical analysis is to find trends when looking at the forex charts and be aware of when they first develop so you can ride the trend until it ends. The foreign exchange market is a very strong trending market, lots of ups and downs in short periods of time, and is, therefore, a place where technical analysis can be very effective. But even considering the great...

What is a Forex Broker?

Eddie Tobey

The Currency / Foreign Exchange market is the world’s largest and most dynamic market. Nearly $1.8 trillion is traded every day. The word Forex is derived from the words Foreign Exchange.

A Broker is an individual or firm that acts as an intermediary between buyer and seller. Forex brokers are firms that deal in foreign exchange. The foreign exchange market is quite similar to the equity markets, except that typical forex brokers do not charge a commission. However, forex brokers are required to have a license.

Forex brokers earn money from the spread (also called “pip”). The spread is the difference between the prices at which a currency is bought and sold. A pip is the smallest price increment in a currency. For example, in Euro/US Dollar (EUR/USD), a move from 0.9008 to 0.9009 is one pip. In US Dollar/Japanese Yen (USD/JPY), a move from 127.41 to 127.42 is one pip.

Forex brokers can be compared on the basis of the spread they charge. Most forex brokers publish live or delayed prices on their websites so that the investor can compare the spreads. It is, however, necessary to check if the spread is fixed or variable. Variable spreads appear small and attractive when the market is quiet, but when the market gets busy the forex broker widens the spread, meaning that the investor will gain only if the market is favorable.

Forex brokers are usually tied to large banks or lending institutions. This is because of the huge sums of money traded in the foreign exchange markets. Forex brokers are required to register with the Futures Commission Merchant (FCM), and are regulated by the Commodity Futures Trading Commission (CFTC).

A new trend among forex brokers is the emergence of online forex brokers, who offer trading facilities to “retail traders” using advanced technology. With these facilities, anyone with a computer and an Internet connection can trade in the forex markets.

About the Author

Forex Broker Info provides detailed information on forex brokers, forex trading and market makers, and other forex-related topics. Forex Broker Info is the sister site of Incorporating in Florida Web.

The latest information and news on Forex Trading:

Yahoo! News Search Results for forex

IntegrityFX announces Live Forex Training for Middle East (AME Info)
IntegrityFX, LLC (IntegrityFX) announced today that it would begin offering Live Forex training in Dubai beginning in May 2009.
Mini Forex Accounts (PIZZAHEROS)
High leverage and low margin in these mini forex accounts play a very important role in magnifying trading gains as well as losses. Mini forex trading accounts come with lower account minimums than of regular accounts, which enables small investors to day trade in foreign currencies.
RBI earns $6 b from forex kitty (The Economic Times)
Despite the central bank?s foreign exchange horde dipping $23.4 billion during April-September 2008, the Reserve Bank of India (RBI) has managed to improve its earnings from forex reserves by about 30% over the same period a year ago.
Forex hedging rewards banks (The Star)
MALAYSIAN banks dealing in hedging instruments, particularly that involving foreign exchange (forex), are reporting profits in this area over the past two quarters.
FOREX-Euro falls broadly as euro zone inflation slides (Reuters via Yahoo! Ma...
* Euro hits 3-week lows vs dollar, sterling
Yahoo! News Search Results for currencies

Currencies: Euro under pressure as inflation slows and PMI falls (Market Watch)
The euro extended losses versus the U.S. dollar and other major currencies Tuesday after inflation data and a closely watched gauge of economic activity reinforced expectations for aggressive rate cuts by the European Central Bank.
Emerging-Market Currencies May Extend Drop, Morgan Stanley Says (Bloomberg)
Jan. 6 (Bloomberg) -- Emerging-market currencies are poised for further losses as recessions force wealthier nations to rein in overseas investment, Morgan Stanley says.
Asian Currencies May Extend Drop in 2009, Brown Brothers Says (Bloomberg)
Jan. 5 (Bloomberg) -- Asian currencies may remain weak in 2009 on slowing inflation, weaker growth and deteriorating exports, according to Brown Brothers Harriman & Co.
Euro to Decline Against European Currencies, Goldman Sachs Says (Bloomberg)
Jan. 5 (Bloomberg) -- The euro may decline by 10 percent against a basket of European currencies, which includes the British pound, Norwegian krone and the Swedish krona, according to Goldman Sachs Group Inc.
Currencies: Dollar rises vs. yen., euro on hopes for U.S. economic stimulus (...
The dollar, marking its highest levels against the euro and Japanese yen since early December, gains ground against most major global currencies, boosted by hopes for a large-scale stimulus plan to jolt the U.S. economy.