Forex Broker

AAA

DEFINITION of 'Forex Broker'

Firms that provide currency traders with access to a trading platform that allows them to buy and sell foreign currencies. A currency trading broker, also known as a retail forex broker, or forex broker, handles a very small portion of the volume of the overall foreign exchange market. Currency traders use these brokers to access the 24-hour currency market.

INVESTOPEDIA EXPLAINS 'Forex Broker'

Forex brokers are usually compensated through the bid-ask spread of a currency pair. For example, a retail forex broker may buy euros for 1.5475 U.S. dollars and, at the same time, sell euros for 1.5478 U.S. dollars. The spread in this case is $0.0003, or 3 pips.

It is valuable to do some research to find out whether a broker has a good reputation and has the functionality that you are looking for. Most major forex brokers will allow prospective clients to use a practice account so that they can get a good understanding of what the system is like. It is a wise idea to test out as many platforms as possible before deciding on which broker to use.

RELATED TERMS
  1. Cable

    Slang used among forex traders referring to the exchange rate ...
  2. Quote Currency

    The second currency quoted in a currency pair in forex. In a ...
  3. Forex - FX

    The market in which currencies are traded. The forex market is ...
  4. Currency Pair

    The quotation and pricing structure of the currencies traded ...
  5. USD

    In currencies, this is the abbreviation for the U.S. dollar. ...
  6. Base Currency

    The first currency quoted in a currency pair on forex. It is ...
RELATED FAQS
  1. What are the goals of covered interest arbitrage?

    The goals of covered interest arbitrage include enabling investors to trade volatile currency pairs without risk as well ... Read Full Answer >>
  2. Will technology ever disrupt the role of the custodian bank?

    Custodian banks, along with other financial institutions that hold custodian accounts, are likely to be disrupted but not ... Read Full Answer >>
  3. How do I close a long position in forex?

    Closing a long position in forex trading depends on whether you are using a broker operating under U.S. trading regulations. In ... Read Full Answer >>
  4. Where did the term 'pip' in currency exchange come from?

    The term pip is an acronym for percentage in point or price interest point. It measures a unit of change within a pair of ... Read Full Answer >>
  5. How do changes in national interest rates affect a currency's value and exchange ...

    All other factors being equal, higher interest rates in a country increase the value of that country's currency relative ... Read Full Answer >>
  6. What is the difference between pips, points, and ticks?

    Point, tick and pip are terms used to describe price changes in the stock market and other markets. While traders and analysts ... Read Full Answer >>
Related Articles
  1. Forex Education

    The Fundamentals Of Forex Fundamentals

    Charting is not the only way to analyze the foreign-exchange market. Learn how to apply fundamental analysis to the economic indicators.
  2. Options & Futures

    A Primer On The Forex Market

    Moving from equities to currencies requires you to adjust how you interpret quotes, margin, spreads and rollovers.
  3. Forex Education

    Top 7 Questions About Currency Trading Answered

    Whether you're puzzled by pips or curious about carry trades, your queries are answered here.
  4. Forex Education

    5 Tips For Selecting A Forex Broker

    Discover the best ways to find a broker who will help you succeed in the forex market.
  5. Forex Fundamentals

    Understanding the Floating Exchange Rate

    Floating exchange rate is the exchange rate between two currencies at any given time.
  6. Investing Basics

    What Happens in a Rollover?

    In the retirement savings realm, rollover refers to transferring the holdings in one retirement account into another.
  7. Forex Education

    Trading Forex Options: Process And Strategy

    What are the processes to trade forex options on most liquid currency pairs, and what are some strategies for success?
  8. Forex

    Top Exchange Rates Pegged To The U.S. Dollar

    From the end of World War II until around 1971, all countries in the IMF pegged their currencies to the U.S. dollar. Today, many still do.
  9. Forex Education

    Understand the Indirect Effects of Exchange Rates

    Exchange rates have a tremendous influence on the economy. Exchange rates can indirectly affect many of the most important aspects of our lives.
  10. Forex

    Top U.S Forex News Sites

    Breaking news moves forex markets. Here are the top U.S. sites for tracking forex news.

You May Also Like

Hot Definitions
  1. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  2. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  3. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  4. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  5. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  6. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!