What a Forex Broker Is and How It Works

By Staff Reporter , Updated Dec 08, 2020 10:20 PM EST
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Forex is wildly popular around the world, and even non-traders may hear about brokers. These companies are the middlemen between their clients and the currency market. Without them, it is impossible to trade online. A reliable brokerage firm facilitates your trading so you can earn a substantial profit regularly. Here is a look at brokerage services in Nigeria today.

Why are so many people into Forex? It is estimated that over 15 million individuals partake in online trading worldwide. They use software to work in formidable global markets. Brokers provide them with the rights tools, access, and guidance. A good forex broker will also supply you with plenty of educational material, so you can learn to trade effortlessly.

Why Use Brokerage?

Think of a broker as an intermediary between you and the market. One cannot open a platform to buy and sell without authorized access. Clients register demo and live accounts which allow them to practice and trade, respectively. 
Demo registration is simple and requires only general information. Those who want to open a live account need to upload a few documents. Still, popular brokers try to make the process as quick as possible. Once approval is gained, and the account is generated, you receive the login and password to your inbox. Voila!
How Traders Make Money

Traders earn money from the comfort of their homes, but what exactly makes this possible? The term Forex stands for foreign exchange or the global currency market. 

Humans have exchanged currencies for centuries, as long as international trade has existed. In the beginning, only banks, hedge funds, and other large institutions could trade currencies online. Since the 1990s, individuals have been able to work alongside those giants. Retail traders open and buy currencies in pairs, and all operations take place through the Internet. But what exactly makes Forex profitable? 

World currencies gain or lose value based on multiple factors, both political and economical. Traders who can foresee these changes, open positions to buy or sell following their projections. As the rates are always in flux, you may capitalize on your knowledge and foresight, provided that you work through a regulated Forex broker in Nigeria.

The Necessary Software 

Trusted brokers like ForexTime allow clients to download software from their website for free. Today, there are desktop and web-based platforms, as well as mobile apps for smartphones and tablets. All operating systems are covered. The user may switch devices during the day and manage the same positions from different machines.

Trading platforms provide them with all the necessary tools for market analysis. First, they can see current prices in real-time, receive the latest news, examine price charts and other informative visuals. It is advisable to base decisions on fundamentals or technical factors. 

The former ones are political and economic drivers like changes in GDP, trade balance, unemployment, etc. For example, when a central bank raises its interest rate, more foreign capital flows into the country, reinforcing its currency. 

Technical indicators allow one to decipher patterns in the market. For example, traders may use moving averages to see whether a new trend is emerging and assess volume to evaluate its strength.

Overview of services

A decent broker should satisfy all of your trading needs. Its services should include the following:

- access to the market, 

- the necessary software - trading platforms and apps, 

- payment processing, 

- customer support, and 

- education. 

Some brokers provide their own webinars and arrange offline seminars around the world. They include links to educational resources on their websites, and articles describing the most common approaches to trading (e.g., day trading, swing trading, scalping, etc.). Support centres work on business days, and they are usually multilingual. Depending on the geography of your broker, the company may have offices in different countries.

How to Choose a Broker

Honest brokers provide details of their licences on the official website - usually, in its footer. Look for approval from entities like the FCA in the United Kingdom, the CySEC in Cypress, or the FSCA in South Africa. 

Oversight from monitoring bodies guarantees the company complies with industry norms, including negative balance protection. However bad your decisions are, you will never lose more than your balance. This is extremely important, as many Forex instruments are leveraged - i.e., you trade with a portion of borrowed funds.

Finding a good broker is more complicated than you may think. In many countries, the market still lacks regulations, and traders may get scammed. Nigeria has absolutely no legal framework applicable to this field. That is why international brokers with licences from reputable organizations are preferable. 

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