A Forex broker is any firm or person who charges a fee in exchange for placing trades for a
trader. A Forex broker does not charge a commission in the same way that a real estate agent would. A real estate agent
charges a commission on the total sell price whereas a Forex broker charges a commission on the spread or the difference between
the traders bid for a currency and the sellers asking price for that currency. Typically, the spread between the
bid and ask price is less than 10 pips, of course there are a couple of exceptions to this rule. A pip is the smallest
movement a currency can move on the Forex market. The lower the spread between the bid and ask price, the less the
trader pays a Forex broker for a trade.
Since the Forex market is global, it does not have one central regulatory agency like the Security Exchange Commission. Each
country is responsible for actions of trades in their own country. In the United States, a Forex broker must register with
the Commodities Futures Trading Commission (CFTC). Forex traders are not regulated, but the Forex brokers are. Forex brokers must
be registered as a Futures Commercial Merchant (FCM) before they are allowed to accept any funds for a trader's account.
After the Forex broker has registered with the FCM, they are given a unique identification number. This identification number
will allow the trading to check the status of a particular Forex broker prior to hiring them. It is highly recommended that traders
contact the authorities and check the status of each potential Forex broker.
There are also Introducing Brokers. These individuals solicit traders to open an account with a registered Forex broker. The
introducing broker cannot accept a deposit for a traders account.
does not charge a commission in the same way that a real estate agent would. A real estate agent
charges a commission on the total sell price whereas a Forex broker charges a commission on the spread or the difference between
the traders bid for a currency and the sellers asking price for that currency. Typically, the spread between the
bid and ask price is less than 10 pips, of course there are a couple of exceptions to this rule. A pip is the smallest
movement a