What is the role of a foreign exchange broker?
The Forex Broker generally executes deals which primarily involves buy and sell of currency. The broker functions typically over-the-counter or OTC market that has no centralized clearing mechanism so there could be a risk of counterparty default. There are no stringent rules governing the financial issues as compared to securities and therefore precaution needs to be taken off when choosing a reliable broker.
How do Forex brokers earn money?
On execution of every transaction, a broker earns through the spread is the difference between the bid prices and ask prices. The difference between the bid-ask rate depends upon the individual brokers. The broker can charge commission as well a spread in some deals and in some case the broker may offer commission-free deals. In those cases, the broker earns the money through the widening of the deals.
What is bid and ask rate?
The bid price is the quotations that one receives for selling a currency while the asking price is the quotation that one pays for purchasing one currency. The bid and ask rate is subject to the movement of the market and subject to changes constantly. In some cases the broker might offer a different rate that is not in tune with the market rates. FXempire Review the best currency rates from time to time.
How do Forex brokers fees is determined?
The broker earns the income on the difference between bids-ask spread that could be fixed or variable. In case of a variable, the spread will depend upon the movement of the market that could be both favorable and unfavorable to the client. In case of fixed commission, the fee is pre-determined in every transaction so there is a possibility that if the market is volatile the client does not lose much money.