In Forex trading, you purchase currency pairs hoping that the price will rise over time. When purchasing currencies, they always come in pairs. For instance, in EUR/USD, you hold on to the US dollar hoping that it will be worth less than the euro. To gain profit, you need the euro to rise more than dollars.
Meanwhile, a Forex broker in UK allows you to join the currency trade amidst all the banking networks and lets you purchase a currency pair of your own that you can hold on to until the price that you want is reached.
How Do Forex Brokers Earn Money?
It’s simple! They make money by taking a portion every time you open a position. Pips are used to measure the changes in the relationship between the two currencies. When making a trade, the broker then charges you with a few pips before the trade goes live in the market. In the market, the trading might be 1.3100 EUR/USD for the buying price, but when you enter the market through a broker, they will put it at 1.3102. By closing the trade immediately, the broker will receive the profit which is between the “market price” and the amount you paid. This amount is called the spread.
A lot may wonder why these brokers get contented with the small money they are making. But you may not realize it readily, a huge number of traders never give too much attention to the small pips as they trade. Everything just looks transparent. The very reason why brokers make money is through Forex leverage. When using leverage, you are allowed to take control of a bigger amount in the market that you can trade with any instruments that you want. If you choose to trade 10:1, you are allowed to take control of $1,000 in the market just by paying the deposit of $10. Leverage surely increases your chance of gaining more profit or losses, but every pip even if it’s very small makes a huge difference in your account.
Win or lose, the broker will always have their share of profit. To give easy access to the market is the main job of a broker and because nothing is free in this world, they charge you a bit. There’s actually nothing wrong with that to think that there are brokers who even provide you with the basic knowledge about trading before the actual trade in the market happens. Currently, there are a lot of options when it comes to Forex brokerages. Some are from huge companies while others are from small ones but their offerings are as competitive as the ones from the big ones. After all, it all boils down to their capabilities in helping you achieve your goals and become a profitable trader along the way. Nonetheless, finding the right Forex broker in UK will help you with the complicated world of trading.