Forex trading in the Philippines is becoming more and more popular every year. Therefore, every future trader should know how they work and what are the hidden rocks of working with a Forex broker Philippines.
What is it?
A forex brokerage company is an organisation that links retail Forex traders to the Forex market. “Forex” is a shortened version of foreign currency, and in the Forex market, they are traded on the “interbank market.” This means that banks trade with each other electronically at different prices, which can vary from bank to bank.
How does a Forex account work?
A forex trading account is like a bank account where you can buy and store currency. Currencies are specially bought in pairs. If you buy EUR/USD, you expect the US dollar to depreciate against the euro over time. The euro has to become more expensive in terms of dollars so that you can make a profit.
The forex broker offers you a way to connect with the banking network and easily buy a currency pair to keep. Prior to the invention of Forex brokers, anyone looking to trade foreign exchange needed a sizable sum of money and a particular connection to a bank.
How forex brokers make money from your trades
When you make a trade, forex brokers profit by getting a cut of the action. The change in the ratio between two currencies in a pair is measured in pips. When you place a trade, the Forex broker will charge you a few pips before putting your trade on the market.
The market may be trading at 1.3100 EUR/USD as the buy price, and when you open a trade, the broker may quote you a price of 1.3102. If you close the trade immediately, the Forex broker makes a profit between the “market price” and the price you paid. This is called a spread.
You may wonder why a Forex broker chose such a small item to earn. The simple answer is that most people don’t consider a few pip differences when trading. This makes the commission “transparent.”
How to find the right forex broker
You can start with reviews if you are looking for a forex broker. Open a trial account with each broker you are interested in, take your time, and test them out. If you plan to trade forex on a constant basis, opt for a 100% reliable partner.