The forex market is a huge market and is considered to be one of the largest and most powerful financial markets that many groups trade in, which has made its enormous liquidity the target of many traders and investors around the world and the role of brokerage firms in it is great because it is small Allowed retailers to trade in it after it was only restricted to banks and financial institutions.
You should choose the brokerage company that you conduct Forex trading business through by buying and selling in the market as it is the link between you and the Forex market, and in this article we are going to discuss the types of brokerage companies and the difference between them and how to choose a forex brokerage company correctly.
Types of Forex Broker Firms:
The brokerage firms in the Forex market are divided into three main types depending on the mechanism by which your trading orders are carried out in the market, namely:
Electronic communication network -ECN
First: Market Maker:
The vast majority of forex brokers are market makers; these companies buy currencies from banks and price providers through the interbank market and then sell them to traders for a price difference between the bid and ask rates. The profit margin, i.e. the spread, is mostly fixed and usually slightly larger than its counterparts.
Electronic communication network: Electronic communication network -ECN
This type of broker executes trade orders in the interbank market directly at the best available prices and in return receives an additional commission on the execution, i.e. a profit margin or a variable spread.
Direct processing companies
It is based on first matching the trader’s orders as a market maker, then automatically forwards the rest of the contracts to the market or another market maker outside the company and receives an additional one in return Execution commission This type is characterized by a variable spread and can often be lower than the price differences for companies of the market maker type
How to Pick a Suitable Forex Brokerage Company?
In the points below, we review the important criteria and considerations to consider when choosing a brokerage firm to ensure that it is valid and that it does not get in the way of your trading in the forex market. It can be viewed as a list of conditions, and the company that meets those conditions can trade through. to be nominated
Does the company offer swap-free accounts?
The process of trading in the foreign exchange market is carried out through the pair system, that is, buying and selling operations for each currency take place against the corresponding currency of the currency pair. Each currency has a different interest rate, therefore there is the so-called rollover or swaps, that is the Difference between the interest rate of the first currency or the so-called base currency and the second currency, which is called the counter currency, and this difference is a percentage that is added or subtracted from the account every day at 10:00 PM GMT in the event that the transaction that is, it was opened before that date and remained open afterwards.
If the interest rate on the currency you bought is higher than the interest rate on the currency you sold, it is in your favor, which means the swap interest will be credited to your account and the swap or swap will be positive, but if the interest rate is the currency you bought is lower than the interest rate of the currency you bought. By selling it is not in your best interest, ie the amount of the rollover or swap will be taken from the account and its value will be negative.
Is the company registered with a reputable supervisory authority?
It does not mean that the foreign exchange or foreign exchange market is traded via communication networks or the so-called OTC system, that it is not subject to regulatory or supervisory authorities that monitor the work of brokerage firms and traders for the occurrence of fraud or damage the interests of customers Each country has regulatory authorities for the financial markets It must be subject to brokerage firms in that country.
The main function of regulators or agencies is to protect investors or traders from tampering that may be carried out by brokerage firms or financial service providers against the interests of their clients’ known and respected regulator.
Does the company offer a good forex trading platform in different formats?
The forex trading platform is your window into the world of Trade in the forex market, and your forex broker should provide a good trading platform that contains everything the trader needs in a simple and easy way, and it must be taken into account that the trading platform is available in more than one form, in the form of one Program installed on the computer, a program for direct trading on the Internet and a program for trading on a mobile phone, so that you can trade in all circumstances.