Forex brokerage is a world in itself within the currency trading market. On the outset it always seems as though only the trading fields are competitive; however, brokers face just as much competition in today's markets. Truth be told, the competition is intense to the point where some brokers end up scamming novices to make quick money. This is why it is important to know how to differentiate a genuine broker from a scammer!
How Brokers Make Money
Spreads are known to be the prime source of a broker's income. The difference between the buy and sell bid is what they earn, or so everyone thinks. Several brokers trade against their own clients; these types of individuals are known as market makers. Initially, traders are made to think that they are trading against other Forex players, while it is actually their broker on the other side! Novice traders fall into this trap and end up losing a good sum of money before quitting.
Straight-Through Processing
STP brokers follow a vastly better model when compared to market makers. These traders make money off of the spreads, and here you are trading against other traders rather than the Forex Brokers themselves. This is a win-win for you because the broker will not be against you in this scenario! Liquidity providers give the market rates and with a small added markup, STP brokers charge their spreads.
True ECN Brokers:
The vastly used brokerage model is the true ECN. Much like STP, traders here deal against other traders, with the only difference being that instead of earning through spreads, brokers earn through commissions charged on each trade individually. There is no separate spread demanded! Their transparent and minimal/zero-spread nature makes them the best choice for traders new and experienced.
A Forex broker should want you to improve on your trades and help you grow. Several in the industry today scam brokers with false claims of profits and lead them into losing trades on purpose. This had made finding a good broker a challenge for traders worldwide. Being an extremely volatile field, Forex can topple your trades and effortlessly throw you into losses; without a reliable broker to work with, currency trading is nightmarish!
Don't settle for the average, and don't fall for false claims - sign up with the world-class Forex broker, WesternFX, and master the art online trading in South Africa. With us there are no hidden costs, no claims and promises; we strive to serve you the best of brokerage possible, equip you with adept platforms and back you up with proven strategies. Open a Forex Demo Account with us and try for yourself!
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