How Do Forex Brokers Make Money? Everything You Need to Know

In the forex market, speculators and traders sell and buy currencies on the basis of their belief that the currency would lose or appreciate the value in future. It is one of the biggest financial markets and at the same time, it’s highly risky. Traders need to go through the intermediary like forex broker to execute the trades.  It does not matter whether the individual trader gain or lose, but the forex brokers would make money through their fees and commission. You need to choose the right broker to conduct transactions for you and understanding about the ways in which they make money will help in picking the right broker for you. You could get the details of best forex broker in Singapore here.

The forex broker takes the orders either to sell or buy the currencies and they execute them. They operate usually through the OTC (Over-the-counter) market. In return for selling or buying the orders, the brokers would charge a commission for each spread or trade. The difference between the asking price and bid price is the spread. The price one receive for selling the currency is the bid price and the price that one need to pay for buying the currency is known as ask price. Few brokers charge both the spread and the commission for each trade. Some brokers would claim to be offering commission-free trades but they would be actually widening the trade spread. Brokers who are established well works with large forex dealers so that they get competitive quotes which offer competitive pricing.

The spread would be either variable or fixed. The spread would vary on the basis of the movement of the market, in the case of variable spread.  The spread changes whenever there is a major market event like interest rate change. This could be favorable or unfavorable change.