What Is Forex Broker?

A Forex broker is simply a financial services company that provides traders access to a platform they can use for purchasing and selling foreign currencies. Forex is an abbreviated term that stands for foreign exchange, meaning trading in currencies, which refers to buying one currency while simultaneously selling another, and this is one of the largest and most liquid markets in the world.
Here are key points about a Forex broker:

Role: Forex brokers act as intermediaries between the retail or institutional trader and the interbank market where the currencies are traded. The forex brokers offer a platform for buying as well as selling the currencies.

Trading Platforms: Online trading platforms by the forex brokers help the clients trade currency pairs. Popular ones include MetaTrader 4 (MT4) and MetaTrader 5 (MT5). These have charts, technical indicators, and trading tools for doing trades.

Currency Pairs: A trader can trade the following currency pairs: EUR/USD, which is a currency pair between the Euro and US Dollar; GBP/JPY, which is a currency pair between the British Pound and the Japanese Yen; and more. These pairs refer to the value of one currency relative to another.

Leverage: Forex brokers often provide leverage, which allows traders to control more significant positions with a much smaller amount of capital. For instance, with 100:1 leverage, a trader can trade $100,000 with only $1,000. However, leverage increases both potential profits and risks.

Spreads and Commissions: Essentially, forex dealers earn money on the spread. There's a buying price, or ask, and there's the selling price, or bid, of currency pairs. Some brokers charge in addition to this, though on commissions.

Types of Forex Brokers:

Market Makers: These are those brokers who set their prices themselves and can trade against the client in some situations.
ECN (Electronic Communication Network) Brokers: This type provides direct interbank market access without a dealing desk, which means no one in fact trades against you. Some charge commissions.
STP (Straight Through Processing) Brokers: They generally route clients' orders directly through to the liquidity providers, with no dealing desk intervention.
Regulation: Forex brokers are regulated to ensure that they operate in a fair and transparent manner. These differ in every country, such as the UK Financial Conduct Authority or the US Commodity Futures Trading Commission.
Customer Service: A good forex broker should have sufficient customer service support to enable its traders to seek help regarding queries they might have about their accounts or trading.

Forex brokers offer account types to suit any kind of trader, from beginner and professional types. A good number of forex brokers are offering free educational resources, on the job training, and additional tools that can be used by a trader. Foremost, one needs to have the following key aspects considered when selecting an appropriate forex broker. Regulation, fees, available currency pairs, and customer service.