The functions in the Forex market are in variable increase in its increase. New Forex Broker companies are currently forming at a high rate. Several people who work in common 8-hour jobs are known to be quitting their jobs and starting to trade in foreign exchange. The most common characteristics of the growth of this market are its size, its profit potential and clearly its simplicity.
When thinking about foreign currency executions and the comparison with the stock market, the difference is due to a more multiplier effect, increased liquidity, volatility with improvements, and lastly, fewer commissions and lower costs. Let’s go for this example, the stock market: When a stock trader, which by the way is a very basic phenomenon for forex traders to test stocks before currencies (a lot of people fail to trade stocks and then it returns to the foreign exchange market, and with good reason), the way in which operations are carried out is that the investor makes purchases and sales paying commissions to both sides of the operation.
What does that mean?
When you trade stocks, you generally do so in collaboration with a broker, who charges you a fixed amount for movements, a dollar amount per share, or a scale commission based on the size of your trade. This commission applies when you buy a share, as well as when you sell it.
The spread is the difference between the price at which a broker will buy the currency for you and the price at which it is sold. Example, if you open a position in which the base currency is the dollar, and since there is no shortage of demand for dollars, the spread of this operation will almost always be smaller than a spread for a less common currency. Why? This is again, for supply and demand. The agent will not have any problems at the time of the seller the dollars that he has just bought, so there is no need to charge the operator, by sea, a greater diffusion. Now, if the position’s base currency is the Vietnamese Dong), it is understood that the spread is very likely to be higher.
Another quality that Forex brokers take into account is when they calculate spreads the type of account in which you are trading. Mini accounts are associated with more spreads. This is, of course, because the agent has to offset the relatively low amount of capital that is traded with a higher spread, in order for us to make a profit.
Now that we have established how attractive Forex currency trading is, it is not completely free. Next we are going to establish the difference between the forex spreads and the commissions of the stock market. The main difference is that in the Forex, generally only the diffusion of a single side of the contamination, the buy side or the sale side is charged. When you buy or sell the currency, it is when brokers generally obtain their benefits by collecting the spread.
It is extremely important that Forex currency traders understand the importance of spread when choosing a forex broker. The difference that a pip can make in the spread of a broker can be the difference between a successful Forex trader and one that fails completely in the currency trading market.