Forex Brokers – Are They All the Same? Key Differences Discusses 

With trillions of currencies being transacted on the globe every year, the forex market remains the most active market in the world. If you wish to be a successful trader in this trading platform, finding a trustworthy Forex broker is essential. You will have to find forex brokers who deal with currencies, as most of the stock trading brokers do not offer this service.  As numerous Forex Brokers are springing up online daily, selecting the best from among them requires a big amount of patience and lots of research. In this post, we will find out if all forex brokers are the same and how to choose them wisely.

What Is Forex Trading?

Forex trading is a process that involves the exchange of one currency with another in order to make profits based on the prevailing Forex market exchange rates. Like stock prices, FX rates for each currency pair fluctuate depending on the demand and supply of the currencies. It also varies based on the foreign exchange market expectations for future events.

Who Are Forex Brokers? 

forex exchange
For trading with foreign currencies, you need a Forex broker to place your trades. To trade Forex, you must open an FX account. Then you should deposit some funds and use the Forex broker’s platform to buy and sell currencies.
Forex Brokers hold your investment in FX accounts whose value keeps varying based on nightly profits and losses. They also handle brokerage fees that include commissions, withdrawal requests, and expert advice. As some of them hide their brokerage fees within legal jargon written in fine print on their site, potential traders need to conduct careful research before starting an account.  A genuine online FX broker will help you start trading as a retail forex trader. This foreign exchange broker will be your primary access point to the FX market. So, you need to make sure that the broker offers the currency pairs and services you need. Forex brokers should also deal with competitive spreads that are suitable for your trading strategy.   

Each Forex Broker Is Different 

Like how there are different types of trading platforms, you will come across different Forex brokers. The differences are due to the varying preferences of the FX traders. The different types of Forex brokers are:
  • Straight Through Processing (STP). 
  • Electronic Communication Network (ECN). 
  • Combination of ECN and STP (Hybrid). 
It is not as easy as you think to enter the FX trading industry. Before you open an account and start trading in the forex market, you need to consider your specific plans and goals. It is not a one-plan-fits-all market. This is the basic reason why you will find different types of Forex brokers in the FX trading industry.

Some of the Best Forex Brokers 

Here are some of the best Forex brokers suitable for trading on the foreign exchange market, especially for beginner traders.
  • Plus500. Easy to use and best suited for beginners.
  • FXTM. One of the best Forex brokers that offer the lowest fees. 
  • OANDA. Has the best user-friendly platform and offers quality research to the traders. 
  • Forex.com. One of the best and most preferred options by US traders.
  • CMC Markets. Provides excellent Forex trading education and is a great web trading platform.

How To Compare Forex Brokers?

One of the main aspects of comparing the different Forex brokers is based on the trading platform they use. This includes:
  • Social trading. 
  • MetaTrader 4/5. 
  • Mobile or tablet. 
  • Web platform. 
The trading platform your broker uses holds a lot of significance, as it decides where and what devices you can use to place trades. For instance, if the Forex broker uses the mobile to place trades and give the customer information, they will open, check and close trades or make amendments from anywhere.  Next, you get to compare based on the key margins and spreads to place a specific trade. For instance, for scalper traders – it would be great to have Forex brokers with very tight spreads who will fix them as well.  Whether you’re looking for a high degree of leverage that provides large returns or low trading costs that are easier to profit irrespective of the marketing moments, you must compare the forex brokers to choose ones that offer the best terms.

Statistical Data and Facts about FX Market and Forex Brokers

  • Known as the largest global market, the foreign exchange market trades nearly $6.59 trillion in currency daily on an average.
  • The Forex market opens on Sunday afternoon and closes by Friday afternoon once the FX traders complete their business. It operates for 24 hours, six days a week. 
  • When comparing the volume of daily transactions of some of the biggest Forex companies in the world, the Forex broker – Forex.com, has the highest. The average volume of daily transactions for Forex.com is $15.5 billion.
  • In the Forex trading market, traders are categorized into bulls and bears. Bulls are those traders who are optimistic and expect the market rates to keep climbing. On the other hand, bears expect the market rates to keep declining and are the downbeat ones. 
  • The trading volume in the Forex market is much higher than the New York stock exchange trading volume. 
  • The most traded currency in the Forex market is the US dollar, featuring about 80% of the Forex market trades. 
  • Around 90% of the trading that takes place in the Forex market is speculative trading. 
  • At one point in time, forex trading was possible only for institutions and banks with a minimum of $40 million – $60 million in liquid funds. Now, traders with very small amounts can also take part in Forex trading.

Concluding Thoughts – Which Forex Broker is Right For You?

Finding the right Forex broker is not an easy task. This becomes even harder if you’re venturing into the Forex trading platform for the first time and unsure what to look for. Ensure to take time and conduct careful research while looking for a Forex broker, as bad decisions can cost you a lot.  Some of the top Forex brokers in the industry will offer low trading costs, robust resources, and accessibility to the global interbank system. Even if you start a small trading account, these brokers will handle your investments with care.