A Forex broker is a broker dealing in foreign
exchange, just like real estate broker who deals in real estate and
properties. Simply, a Forex broker is an advisor who advises you about the
forex market. However, the Forex market is not the perfect place to play
with as a novice and beginner as there are many criticalities involved
along with much risk bearing capacities. Novices can very quickly get
their fingers badly burnt. But inexperience is not the only reason to
consider using a Forex broker to trade in the high-risk international
So, the Forex broker is an advisor who advises you about the forex market
and allows you to work for 24 hours a day with major currencies like EUR,
JPY, GBP, CHF etc against the US dollar on the spot, i.e. according to the
current prices on the forex international exchange market. But the level
of profits depends only on your abilities as well as your timely decision.
Although the role of the Forex broker is relatively redundant as a result
of technological advancement and increased awareness, we cannot completely
underestimate his role. The new paradigm shift has had something of a
democratizing effect on the financial markets, and in the years that have
followed a plethora of banks and brokerages have extended the range of
their services to a new market by packaging up their online trading
systems for the retail market, enabling the more modest investor to trade
from their own computer screen — even on the previously out-of-reach
currency markets. This is where the real role of Forex broker starts.
PIP is nothing special but Price Interest Points. In the forex market,
currencies are always priced in pairs. The quoted price is the level where
we, acting as the market maker, are willing to buy/sell the currency pair.
In the wholesale market, currencies are quoted out to four decimal places,
with the last placeholder called a point or a pip. A pip in most
currencies is one /10,000th of an exchange rate (in USD/JPY, it is one
/100th, likewise you can find for others).
Let's see some more information about Spread. As with all financial
products, forex quotes include terms like 'bid' and 'ask"'. The 'bid', in
its simplest terms is the price at which a dealer is willing to buy (and
clients can sell) the base currency in exchange for the counter currency.
The 'ask' is the price at which dealer will sell (and clients can buy) the
base currency in exchange for the counter currency. The difference between
the bid and the ask price is referred to as the spread. The spread defines
the trader's cost, which can be recovered with a favorable currency move
in the market. The value of a pip is determined by the pair of currencies
being traded, the rate at which the currency pair is trading and the size
of the position being traded.
There are many great Forex brokers, like COESfx, who maintains tight,
competitive spreads in the four major currencies against the Dollar, and a
total of 17 currency pairs including USD/CAD and AUD/USD.