Understanding the Basics of Forex

Understanding the Basics of Forex

Forex has always been a popular choice for investors but the economic turmoil from the Covid-19 pandemic has spawned renewed widespread interest in it. With paychecks not as certain as they were previously and people spending more time at home, this is the ideal time to consider a forex trading account.

Choosing a broker

When you choose a broker to trade Forex, you are essentially making them the middleman between you and the markets. This means that all your cash is going through them. As with all financial transactions, do your research to find a company in whom you can trust.

Before you settle on a reliable broker to trade Forex, you will also need to consider what format you prefer – dealing desk or no dealing desk (NDD).

A dealing desk broker is the most basic – they simply conduct the forex trade on your behalf, based on the bid and ask prices you specify. The broker waits for the rates to become available before making the trade. The value of the trade is almost entirely dependent on the investor.

An NDD broker works with multiple liquidity providers and is thus able to obtain more attractive bid and ask rates. The rates are also available immediately. The downside is the ‘spread’, the value of the trade that is taken by the broker as their fee.

Both types of brokering models may also charge an additional commission on top of this. Because the NDD broker also charges a spread, the total fees are generally higher.

Meeting Regulations

There has been a sharp increase in forex trade since the start of the coronavirus pandemic and this has unfortunately led to more forex-related scams. Before settling on a broker and laying down your hard-earned cash, find out how the company is regulated.

Different countries have their own regulations and they may not be as strict o as secure as another’s. The onus lies on you to ensure that you have a trustworthy trading partner. A good example is ForexTB. Engage with their customer support and gauge for yourself their dependability before you start trading.

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