A Forex broker acts as a go-between for the interbank network and you. If you don’t know what an interbank is, it is a term that refers to a network of banks that trade with each other.
These companies give a number of benefits to the trader. A Forex broker typically provides quotes from banks where they have access to Forex liquidity and lines of credit. Many brokers use multiple banks for pricing, and they will give you the best one available.
But is it really so crucial to find a Forex platform Philippines? Let’s figure it out!
Advantages you get by partnering with a broker
Leverage
Forex leverage is available for every account, ranging from 10:1 to 100:1. For example, a leverage of 10:1 means that for every dollar in your account, you have $10 to trade.
Leverage is good and bad, as you can make exponential profits but also suffer mounting losses. Forex brokers are required by law to report this, and they tend to do so in the fine print. Beginning traders tend to get excited and ruin their accounts quickly if they jump in too quickly.
Two balances
Another benefit you get is the display of two different sums in your terminal.
Two balances are shown when you work and trade with a regulated Forex broker. Your real balance, excluding any open trades, is one balance. Your other balance would be your balance if you closed all of your trades. Your “net balance” refers to the second balance.
Bid-ask spread
When you open a deal with a broker, they pass it on to the market for you. In doing so, they offer you a price for a currency pair that is slightly different from what they can get.
You will see it in the form of a quote like EUR/USD 1.3600/1.3605, where the broker will give you the first number if you want to sell EUR, and the second number is what the broker charges if you want to trade. The difference between 0.0005 or five pips is the broker’s commission. The spread can widen or narrow depending on supply and demand in the market.
Paying for the difference between the bid and offer is called “collecting the spread.” A spread or commission of some kind is basically transparent to trading from a trader’s point of view. However, you should always remember that the beauty of the spread from a broker’s point of view is that it is taken from your leveraged trade size, not your account balance.
Conclusion
Trading with a broker is more of a rule than a trader’s will, but we tried to explain why this can benefit you. Brokerage companies exist to make it easier for you to contact banks that buy and sell currencies.
When choosing a firm to work with, first check if any US authority regulates it. Regulated brokers disclose this information on their websites.
