Here we will share valuable information from our vast experience in the forex industry and will present the way forex brokers operate. If you reached this page searching for the best forex broker in the world, you should keep reading because this is probably the first website that will tell you the truth instead of just flashing their sponsors in front of your eyes. How the online forex industry works If you want to trade forex it is very important to understand what you’re dealing with and how the industry works. The forex market is the largest market in the world by 100 forex brokers stp ecn dma volume of daily transactions and there is money to be made here, and this is why a huge industry developed around forex trading.
This greatly distorts the reviews and the rankings you will see on such websites, as the website owners will promote the brokers who sponsor their websites. So, the first thing you should know about the forex industry is that brokers pay a lot of money to be displayed on reviews websites and this is why the information you will see there is not objective. How do forex brokers make their money? Or at least, this is what they all say on their websites But is this actually true? As with most things, there is some truth in this statement, but things are not exactly the way they are presented.
There are actually three different business models that forex brokers use in order to make money. Below, I will present the three of them. The brokers using this business model are just waiting for their clients to lose their money, since they are the counterparty of the trades. They are very similar to bookmakers as they make money when the client loses.
Of course, the spread plays a role in this business model as well, because the spread gives the broker an edge against the trader and will cause the novice traders to lose money in the long run. For example, if the liquidity providers have a 0. This business model is very similar to the one described above, as the broker will execute your trades directly to the liquidity providers giving you direct market access. The difference between the two is that in this case, the broker will charge a commission for every trade you place but will not add a markup to the spread. This means that you will trade directly against the liquidity providers at interbank spreads.