What Are Forex Brokers?

Now that you know your bit about forex, you’re probably itching to start your pip adventures.

But before you set off on your trading journey, there is one more thing left to do… 

Creating an account with a broker!

Sure, whatever. What the heck is a broker?

Ok ok.

Let’s get to it.

What are brokers?

Brokers, also known as market makers, are a financial intermediary that matches a buyer with a seller and arranges the transaction between the two for a commission paid by the initiator or by both parties..

Forex brokers make their money from the difference between the buy and the sell price (the spread) and can therefore offer commission free trading.

brokers

History of Forex Brokers

You see, back in the 90s, it was soooo much more difficult to participate in the retail forex market. This was mainly due to high transaction costs.

At that time, governments were like strict parents keeping an eye on all exchanges, restricting a considerable amount of trading activities.

And then, on one wonderful day, the CFTC decided that enough is enough.

They passed a couple of bills, namely the Commodity Exchange Act and the Commodity Futures Modernization Act, and opened the doors for online forex brokers.

And as you may have guessed, online forex brokers were eager to take advantage of the booming forex industry. 

And they sure did.

There are so many brokers to choose from out there, that it makes it a little tough to choose one.

Decisions, decisions…

There are hundreds of brokers online so how are you supposed to know which one to choose and what the most important features are? 

Are you supposed to be looking at the fees? Spread? Charting? Analysis option? Minimum deposit? Do they offer demo accounts? AAAAARGH!! 

It’s easy to get overwhelmed with the amount of information you’re supposed to be looking at. Especially if you’re not even sure what to look for!

Luckily though, we have been trading for over 50 years now and know exactly what distinguishes the good one from the scammers.

So worry not, we are here to make your life easier.

The first step in choosing a forex broker is finding out what your choices are.

There are two main types of forex brokers:

Dealing Desks (DD)
No Dealing Desks (NDD)

forex broker types

Find out more about each of these in the next chapter.