Forex brokers are companies giving currency traders access to forex trading platforms, where the traders can buy or sell foreign currencies. The broker can equally be called a currency trading broker or retail forex broker. Despite the popularity and importance of the broker, it is only involved in handling just a small fraction of the overall volume traded in the foreign exchange market. The broker is the gateway via which the trader accesses the currency trading platform. The broker provides 24 hours access to the currency market; though forex trading only takes place five times a week.
The Best Forex Brokers in NZ
How Forex brokers make money
The currency trading brokers make a profit every time someone places a buy or sell trade on their trading platform. They make money from the bid-ask spread on each of the currency pairs traded on their platform. If the “bid” on the US dollar is 1.2010 and the “ask” is 1.2015, for example, the spread is $0.0010, which translates to 10 pips. The wider the spread, the more the amount the broker can make from that currency pair.
Aside from the pip spread, the broker equally makes money by charging currency traders a transaction fee for every buy or sell order placed by the trader on the broker’s trading platform. Over the years, the forex trading market has experienced a lot of competition and this has forced many forex brokers to reduce their transaction fees or even scrap transaction fees altogether. This same huge competition has forced many of them to reduce the pip spread on each currency pair on their trading platform.
How to choose a good currency trading broker
There are several forex brokers operating here in New Zealand with many of them claiming to be better than the rest. Before you pitch your tent with any of them, it is in your best interest to properly investigate them for reliability. The points highlighted below will help you to make the right choice among currency trading brokers operating in New Zealand.
- Check for licensing: Do not deposit any money with an unregulated or unlicensed forex broker; such a broker cannot be trusted not to steal your funds. Find out if the broker is registered with the concerned authority in New Zealand or international regulatory bodies.
- Do they offer a demo account: The demo account helps to sharpen your expertise in forex trading. Do not register with that broker if it is unwilling to give you access to a free demo account.
- How many trading instruments do they offer: The more the merrier. Access to a huge number of trading instruments can increase your chance of making it big in forex trading and online trading uk.
The points above would have taught you a couple of things about forex brokers and how to choose the best among them in New Zealand. Never forget to read up reviews about them before funding your account with any of them.