Trading foreign currency can be a very simple act that many of us perform every time we travel. If we are living in the US but take a trip to London, we would take a few USD and trade them in for some British Pound Sterling. When moving on to Italy, we would go to a bank and buy a few Euros. And on and on. We are buying, selling or trading one foreign currency for another. So what exactly is so different about trading in forex, and why is a broker needed? Well, in all truth, it is not mandatory to trade with a broker. After all, a broker does take a commission and if you want it all for yourself, then try going it alone!
However, there are so many advantages to signing up with a broker that most traders find it beneficial and even more profitable to work with a company.
Learning with a Broker.
One of the first advantages you will notice with a broker, specifically in South Africa, is that after opening a trading account, you can ask to be set up with a “dummy” account. In this scenario, you get a chance to learn in “Realtime”. With your broker as a leader, guide or instructor, you can use “funny money” to begin making trades. Find your weak spots, see where you need to spend more time learning and feel the excitement of trading forex with the big guys. Take your time and use the trading platform of different brokers to see where you feel the most comfortable. Take advantage of the analytic tools offered. Get used to it and how it works.
After you’ve experienced a few wins and losses, then you can consult with your broker as to your next step, which is probably funding your forex account. Unlike other financial markets, it doesn’t take a lot of money to get you started here. Even with a few hundred dollars, you can sign up with a broker and enter the forex market. Don’t forget, your broker is always there. You can treat your broker as a silent partner or ask for suggestions and advice.
Brokers Have Your Back.
One of the most obvious advantages to trading with a broker is the leverage aspect. Brokers will always provide you with leverage. That means that using only small amounts from your trading account, you can trade large lot sizes. This is how you can use a little bit of money to earn more. If you are spot trading, you will realize profits only if you sell at a price that exceeds the spread margin allowable. You can also take advantage of Realtime quotes of the current market situation that brokers provide. You can see the quotes of several different currency pairs and compare them, which can save you time and money when preparing to enter a trade.
The good news is that whether you use a broker or not, there is money to be made in forex!