If you are a Forex retail trader like me then you know that the doors of Forex trading, opens to you through your broker or rather market maker. The first step that you usually take to trade currency pairs with real money is to open an account with a brokerage firm and then enter, manage, and exit trades through them.
Nowadays most people trade electronically via a trading platform such as MetaTrader, TradeStation, ForeXecutor, or other server-based (http) or client-based platforms. Some, however, may still call their broker's dealing desk by phone to execute a trading request.
No matter which method you use, broker plays an important role in your trading experience. Here are some examples of the broker's effect.
- They define which currency pairs you may trade. Some currency pairs are available through most brokerage firms but many of those pairs that are less traded are not offered by every market maker.
- The exchange rate or rather the Bid price could be different at a time from one firm to the other. Sometimes such differences are significant.
- The spread that you need to pay per round of trade depends on their policy.
- They could widen the spread when the market is less liquid or for any other reason. It is common to call this action slippage which affects the Ask price.
- They may charge you a commission per round of trade. This could especially happen if you have signed up with them through an introducing broker.
- The rollover or swap rate they charge depends on their policies and could be significantly different from other brokerage firms.
- The time that you could trade depends on your broker. For example some firms shut down their dealing desk for several minutes every day for maintenance purposes.
- Their margin call policy could be different from others.
- The charges involved in transferring your profit to your bank account, depend on the contract you hold with your market maker.
- The technical support such as resolving platform malfunction highly depends on how they value your business.
