How Forex Brokers Work?

We know that Forex brokers are the bridge between us and the massive Forex market where we can either make or lose a substantial amount of money in just a short period. When we think of Forex brokers, we picture savvy professionals with business suits, sitting up in their multi million dollar offices doing what they do.  And while this may be true at times, it’s also helpful to know that there is nothing magical or inexplicable about what these brokers do for a living. In fact, it is quiet straightforward.

As we know, the main objective of Forex brokers is to provide retail investors like you and me access to the $5 trillion Forex market. Of course, there is a series of procedures that they need to follow in order to become an official Forex broker. The first step is to become licensed or signed on to a licensed business. A company needs to have the appropriate securities licensed and fill out a registration form with the SEC in order to be a full service broker. Now, the procedure and requirements for licensing as well as regulation work differently among countries. Some regulatory bodies are stricter than others but all of these have a set of rules that the brokers need to adhere to. It’s also important to note that the biggest hurdle of all Forex brokers is becoming regulated.

After the regulation

The job of the broker is to make investments on the behalf of its clients. For this service, most brokers can either charge an hourly rate so they can make their money off commission. There is another second option though and it’s much more risky because if a client does poorly, so does the broker.

Perhaps the most well known way of how Forex brokers make money is through the ‘spreads’. This is known as the amount of pips between the bidding price and the asking price. Whether you buy or sell, your broker gets the spread.

Most brokers today stay on top of the market every waking moment as the Forex market never closes. All countries around the world participate in Forex and is active at all the times of the day.

Forex Trading from Malaysia

Although Forex trading has become legalized in Malaysia, you would find a wider range of choices of Forex brokers if you consider looking among offshore brokerage companies. When deciding which one to deal with, make sure that the broker is not only licensed but regularized as well.