If you have thought about trading currencies, you have also probably looked at some brokers by now. You will have noticed forex introducing brokers that offer some incentives to open your brokerage account through them. You should understand a few things before accepting that offer.
The forex is an international currency exchange. It makes international trade and investment run smoother by making it easy for banks, individuals and business to complete transactions across borders. It is where one nation's currency can readily be exchanged for another. There must be read buyers for every seller, at all times, to make the system run smoothly. This liquidity is provided to the market by speculators including hedge funds, banks, investment funds and individual investors. They can make a profit, or loss, by attempting to take advantage of small variations in the relative value of the different currencies.
If your trading plan works, and makes you a profit, you can live comfortably and have an enjoyable lifestyle. On the other hand you can rapidly loose everything you invest, especially if using leverage by borrowing money from your broker to trade.
Choice of a broker is important. Their profit comes from commissions earned when you trade. This commission, or spread, is the difference between the market and what you pay.
A middleman known as an Introducing Broker, gathers investors and turns them over to another broker. He is paid a part of the spread as a sort of finders fee. He then gives some of this money to you, the trader, as a cash rebate each time you trade a round lot.
First you will want to do a little research. Go to the regular broker's website and find out what their normal spread is. Make sure it is not being widened when you open your account through the IB. This is one way that they could cover the IB's commission. This costs you money. It also could cause your stop orders to be activated sooner, causing losses on some of your trades, and negating the rebates you received.
There are reasons a broker would gladly pay the IB out of their own profits. The IB can help them find customers and lower their market and advertising expenses. Just make sure you will get the same spread and trading conditions.
Profit margins in currency trading are often narrow. Receiving rebates on your trades can increase your income considerably over a year. It could be the difference between making money or loosing.
Keep in mind that a broker gets paid when you trade. He gets paid more when you trade more. When you get rebates on your trades, you may be tempted to make more, or riskier trades. This will loose you money.
Trading currency successfully is profitable and enjoyable. Getting a broker by going through forex introducing brokers can make that happy situation either more or less likely. Be sure you do not pay for your own transaction rebates by having your spread widened to cover the commissions.
The forex is an international currency exchange. It makes international trade and investment run smoother by making it easy for banks, individuals and business to complete transactions across borders. It is where one nation's currency can readily be exchanged for another. There must be read buyers for every seller, at all times, to make the system run smoothly. This liquidity is provided to the market by speculators including hedge funds, banks, investment funds and individual investors. They can make a profit, or loss, by attempting to take advantage of small variations in the relative value of the different currencies.
If your trading plan works, and makes you a profit, you can live comfortably and have an enjoyable lifestyle. On the other hand you can rapidly loose everything you invest, especially if using leverage by borrowing money from your broker to trade.
Choice of a broker is important. Their profit comes from commissions earned when you trade. This commission, or spread, is the difference between the market and what you pay.
A middleman known as an Introducing Broker, gathers investors and turns them over to another broker. He is paid a part of the spread as a sort of finders fee. He then gives some of this money to you, the trader, as a cash rebate each time you trade a round lot.
First you will want to do a little research. Go to the regular broker's website and find out what their normal spread is. Make sure it is not being widened when you open your account through the IB. This is one way that they could cover the IB's commission. This costs you money. It also could cause your stop orders to be activated sooner, causing losses on some of your trades, and negating the rebates you received.
There are reasons a broker would gladly pay the IB out of their own profits. The IB can help them find customers and lower their market and advertising expenses. Just make sure you will get the same spread and trading conditions.
Profit margins in currency trading are often narrow. Receiving rebates on your trades can increase your income considerably over a year. It could be the difference between making money or loosing.
Keep in mind that a broker gets paid when you trade. He gets paid more when you trade more. When you get rebates on your trades, you may be tempted to make more, or riskier trades. This will loose you money.
Trading currency successfully is profitable and enjoyable. Getting a broker by going through forex introducing brokers can make that happy situation either more or less likely. Be sure you do not pay for your own transaction rebates by having your spread widened to cover the commissions.
About the Author:
Thinking about becoming a currency trader? Learn more about forex introducing brokers now in our overview of everything you need to know about exactly how and where to find the best forex trading system .
No comments:
Post a Comment