Benefits of a Forex Broker to a Retail Trader
Forex trading has become a popular job for those who want to make money without having to go to an office. All you need is a computer to access the markets and a stable internet connection. With its high liquidity levels and ease of accessibility, it has attracted a lot of people into playing the markets.
To access the market, a trader needs to go through an intermediary. These intermediaries are known as a forex broker. Forex brokers provide retail traders with account through which they can access the market and place trades.
Why is it necessary for retail traders to use forex brokers?
They provide easy access
Unlike banks, who control most of the forex market, retail traders have little capital. Forex traders allow them to open accounts, and provide them a gateway to the markets even with their limited capital outlays.
With the rise in the number of brokers, there is increased competition for traders. To attract more traders to open accounts with them, some brokers allow for as little as $50 to open an account with them and start trading.
Forex brokers provide education and advice
When you open an account with a forex broker, they will often contact you to find out what level of trader you are and to find out what your needs are.
Most forex brokers send out regular emails to advise their account holders on the market outlook and to give advice on how they think they should trade to make profits.
Brokerages also make video lessons for their clients in an effort to practically show them how to carry out market analysis and how to come to the right trading decisions for higher profits.
Forex brokers allow traders to improve their trading positions
Brokers allow traders who trade through them to access the market with more money than have. This is one way through which brokers make money and is known as leverage. Simply, leverage is a loan.
Brokers allow traders to hold larger positions in the market by offering them money to trade with. This leverage is offered in ratios. For example, if you have $1,000 in your trading account and leverage your account on a 1:10, you can take a position worth $10,000 in the market. As a result, you can make a larger profit than you would have in your initial cash position.
On the other hand, you will have to bear the losses you incur and pay for the leverage which could wipe out your trading account entirely.
Forex brokers provide practice platforms for traders
For a completely green trader, this is one of the most important benefit received from forex brokers. Brokers are able to do this by offering to traders demo accounts.
These are fully fledged accounts that can access the market like real accounts only that they have virtual money. They are meant for new traders to practice how to trade the market so that when they finally invest real money in to the market, they will have already learnt the ropes.
Withdrawing your profits
It is only through a broker that one can access the markets. After making successful trades in the market, comes the profits. Without forex brokers, it will be hard for retail traders to access their profits.
Forex brokers make it easy for day traders.to access their profits at any time they need them.
Provide access to commodities trading
Forex brokers have access to the entire financial markets. In addition to forex, there are other classes of items that can be traded. These items could be common agricultural products or a number of raw materials used in manufacturing such as aluminum and copper. Newly created online currencies such as Bitcoin can also be traded through forex brokers. These alternative items to trade are known as commodities.
As forex brokers provide access to the currency exchange market, they also provide access to the commodity trading markets which are mostly a preserve of well capitalized financial institutions. and not retail traders.