How Brokers make their money.
The foreign exchange market,is the speculators traders on weather a currency will go up or down, and buy and sell currencies determined on they assumption.Traders will need to go through a forex broker to enable them to execute their trades. Weather the trades win or lose for the trader, the forex broker will make money from commissions and fees. With an understanding of how forex brokers make money you can ensure you choose the right broker.
Forex Broker Fees
You use the forex broker to open and close your trades,in return the forex broker will charge a commission per trade or a spread. A spread is the difference between the selling price and the buying price, generally referred to as Bid Price (Selling) and Asking Price(Buying). The difference between these two prices is the broker’s spread. Some broker’s may charge both a commission and a spread fee on your trades. Some brokers offer commission-free trades. Actually, but they make their commission by widening the spread on trades, which you will see during trading.
There are fixed spreads and variable spreads, variable spreads will change during trading depending on how the market is moving. Which one you have will depend on your broker, so be vigilant in choosing your broker. One aspect to note is that a forex broker can have a different spreads for buying and selling the same currency.
When choosing your broker, shop around, a good broker will offer the trader more competitive spread rates across the currencies
The Bottom Line
Take spread rates into consideration when choosing your broker.