Trading with brokers

Foreign exchange brokers, unlike others financial brokers, do not take commission from customer; they only work for banks. Their roles are to bring together buyers and sellers in the market, to optimize the price they show to their customers and quickly, accurately, and authentically executing the traders' orders.

The majority of the foreign exchange brokers execute business via phone using an open box system— there is a microphone with the broker that let him communication on the direct phone lines to the speaker boxes in the banks. By using this way, all banks can hear all the deals which are being executed. Due to the open box system, a trader is also able to hear all prices quoted; whether the bid was hit or the offer taken; and the following price. What the trader will not be able to hear is the amounts of particular bids and offers and the names of the banks showing the prices. Prices are unidentified. Sometimes brokers charge a commission that is paid equally by the buyer and the seller. The fees are negotiated on an individual basis by the bank and the brokerage firm. Brokers show their customers the prices made by other customers either two-way ( bid and offer ) prices or one way ( bid or offer ) prices from his or her customers. Traders show different prices because they "read" the market in a different way; they have different opportunity and different interests. A broker who has more than one price on one or both parties will automatically optimize the price.That means, the broker will always show the highest bid and the lowest offer. Therefore, the market has right of entry to an optimal spread possible. Fundamental and technical analyses are used for predicting the future direction of the currency. A trader might analyze the market by hitting a bid for a small amount to see if there is any response. Another advantage is that brokers might provide a broader selection of banks to their clients. Some European and Asian banks have overnight desks for 24 hours optimization dealing with counterparts in American banks, adding to the liquidity of the market.

Direct Dealing

Direct dealing is based on trading reciprocity. A market maker—the bank making or quoting a price — look forward to the bank that is calling to respond to making a price when called upon. Direct dealing provides more trading judgment, as compared to dealing in the brokers' market. Direct dealing used to be conducted mostly on the phone. Phone dealing was error-prone and slow which were difficult to prove and even more difficult to settle. Direct dealing was perpetually changed in the mid-1980s, by the introduction of dealing systems. Dealing systems are on-line workstations that link the contributing banks over the world on 1 on 1 basis. The performance of dealing systems is characterized by speed, reliability, and safety. The software is rather reliable in working on large exchange rates and the standard value dates. In addition, it is very accurate and fast in contacting with other parties, switching among conversations, and accessing the database. The trader is in continuous visual contact with the information exchanged through video conferencing. Video conferencing between both sides is much better than pure conversation. Most banks use a group of brokers and direct dealing systems. All approaches reach the same banks, but not the same parties, because corporations, for example, cannot deal in the brokers' market. While developing reciprocal relationship between traders and brokers, traders select their trading medium based on price quality, not on personal feelings. The market share between dealing systems and brokers fluctuates based on market conditions. Fast market conditions are beneficial to dealing systems, whereas regular market conditions are more beneficial to brokers.

Matching systems

Contrasting dealing systems, on which trading is not unknown and is conducted on a 1 on 1 basis, matching systems are unknown and individual traders deal against the rest of the market, similar to dealing in the brokers' market. Nevertheless, not like the brokers' market, there are no individuals to bring the prices to the market, and liquidity may be limited at times. Matching systems are for smaller amounts.. In addition, credit lines are automatically managed by the systems. Traders input the total credit line for each counterparty. When the credit line has been reached, the system automatically disallows dealing with the particular party by displaying credit restrictions, or displays the only price for traders who have open lines of credit. As long as the credit line is restored the system allows the bank to deal again.

Best Broker recommendation

Firm Name	Language Support	Account Opening Minimum	Free Demo Account	Mini Forex Trading	Leverage/ Margin Requirement
Fxtrader.net	English	$1,000	Yes	Yes	100:1 (1% margin)
GFX Group SA	English, German, French, Spanish, Korean	$2,000 - $5,000	Yes	No	0.5% (200:1)
NorthFinance	English, German, French, Russian, Arabic, Farsi, Greek	$100	Yes	Yes	5 00:1 ( 0.2 % margin)
Western Capital Forex S.A. Switzerland , Geneva	English, German, French, Arabic, Farsi, Russian	$5,000	Yes	No	200:1 ( 0.5 % margin)
AC- Markets	English, German, French, Spanish, Korean ,Italian ,Middle East, Portuguese , Brazilian , Russian, Japan , Turkish , Farsi	$5,000 standard account, $50,000 institutional account	Yes	No	100:1 (1% margin).