In the world of investing, the most valuable asset to an individual investor working from home, is their broker. A broker is a window into the world of the commodity you wish to trade, and it provides the insight, research, and comparable knowledge into the past of these commodities. Of course, in the world of forex, things are a bit different, but that doesn’t stop the similarities from existing in abundance. Forex brokers provide a window into currency, and permit investors to purchase from a variety of nations and banks. But they can also offer much, much more, frequently making them an inescapable tool for many investors.
Frankly, forex brokers vary in what they offer, so it’s important to determine in advance what kind of investment experience you’re looking for as a trader, and if that broker can provide that for you. Some brokers are simple, providing access and a means for trading currency. Others can be quite complex, offering a variety of enhanced features, but of course, for a price. No broker is free – they all find a way to make a profit somehow, whether it is through commissions, fees, or monthly charges.
Forex Brokers Provide Trading Access
The primary point of your forex brokers is to provide a way to connect individual forex investors to available currency at competitive rates. Some brokers connect directly to banks, while others connect to what is called ‘dealer desks’. Different connections offer different access. Some brokers might be able to trade currency that aren’t very popular, while most other brokers will mainly just trade the worlds major currencies. Sometimes, the broker will add on a small percentage to the currencies for buying, selling, or both. This additional cost goes to the broker, and is a cost factor that needs to be considered when placing trades for profit.
Forex Brokers Provide Your Leverage
Many forex brokers provide trades with what’s called leverage. Leverage is a simple but useful tool for generating higher profits. It allows an investor to move more currency units without having enough actual capital to cover the full trade. Brokers provide this because they know that currency valuations generally don’t move more than about one percent against one another in a given trading day. Because of this, brokers know that most investor’s capital could cover one percent of loss, and maybe even then some. So they provide leverage as a sort of inverted credit, allowing investors to place bigger trades in the hopes of generating higher profits.
Forex Brokers Handle Your Trading
The other major advantage of a broker, is having the ability to control your portfolio, even when you’re not necessarily in front of it. Many brokers offer what is called stop loss orders, which automatically exit a trade if it experiences a certain amount of loss. This criteria is established by the investor. Other brokers expand this feature into fully automated trade triggers, which scan a particular trade for investor-established criteria and execute the trade right away.