Why do you need a broker for Forex Trading?

logomark Anthony Gallagher calendar Last Updated: November 2021 timer 5 min read
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Getting started in forex trading has never been easier. That has a lot to do with the availability of so many excellent forex brokers that you can choose from. You can find many of these that we have already reviewed here if you check out our selection of the best brokers for forex trading.

You may wonder though, why do you need a broker for forex trading? There are many reasons why having a broker to trade through is in your best interest and that is exactly the question we will look at in this post.

Table of contents

Why do you need a broker for forex trading?

Right away let’s address the key question of why do you need a broker for forex trading?

Trading without a broker is possible, though using a broker is very helpful. The financial barrier to trading forex without a broker is extremely high. Brokers are large financial institutions that can help you overcome this. They are also well-regulated and can help lower your trading costs while providing extremely fast trade execution.

What is the role of a Forex Broker?

To understand why you need one, let’s take a closer look at exactly what is the role of a forex broker.

A forex broker facilitates retail customers to trade on the international forex market by connecting them through a liquidity provided they have access to. For a small fee, they match a trader’s order with the liquidity provider. Some brokers will operate their own internal market as an intermediary.

Lower volume trading from casual retail traders is also made possible by forex brokers who aggregate smaller trades together to execute in the marketplace at high enough volume. This is one strategy that helps brokers keep costs as low as possible even for small volume traders.

Benefits when trading with a forex broker

As mentioned, there are many points where the use of a top broker can be very helpful when you decide to start trading. Here are some of the key benefits:

Get lower Spreads and minimum trading Costs

Keeping costs low is vital when engaged in any form of trading. Forex trading is no different. Trading without a broker you would incur huge costs with wide spreads and large commissions.

With a broker though, these costs are greatly reduced and highly competitive with commissions typically starting as low as $4 per lot traded, and spreads being extremely tight thanks to the infrastructure provided.

Margin trading becomes possible

It is true that margin trading and using leverage can be risky.

Particularly for experienced traders though and those who have good risk management, margin trading opens the door to higher volume trading with lower capital requirements. Only brokers can practically facilitate this.

Fast and efficient execution models

Executing your trades as fast as possible is vital if you want to lock in the best rates and not miss a market move.

Since forex brokers are directly connected with top-tier banks and major liquidity providers, they can ensure that trade execution is often lightning-fast within milliseconds in most cases when you want to open and close a position.

Enjoy a regulated trading environment

Even though the forex market itself is an OTC market, the brokers themselves and the financial institutions involved are all extremely well-regulated. This means you will be fully protected when trading through a broker who has to follow stringent rules from their regulator. This would not be the case if you were trading alone.

Regulation means that with the majority of brokers, you cannot lose more than you deposit. Your deposited funds will also be held in segregated accounts at top banks only to be used for your trading. Further insurance is also often provided that in some cases can protect funds up to $1,000,000 against any form of fraud or bankruptcy of the broker.

Overall, do you need a Forex Broker or not?

In all, there is little doubt that you need a forex broker when you decide to trade. Nobody wants to pay hundreds of dollars in commissions and fees for slow trades that may not be protected. So, yes having a forex broker is much more beneficial.

Trading with a broker whether you are a retail trader of any experience level, or a professional trader can help you trade securely, have vastly lower costs, fast execution, and access to leverage if you want it.

There are so many top forex brokers around the world for you to choose from. We have analyzed and scanned the market in order to find the best ones according to our methodology, and we have chosen 10 of them. You will find them featured in our top 10 best forex brokers post

Of course, there are still some costs and other things to consider, so if you are really resolute in your determination not to use a broker, you can also take a look at our post here on how to trade forex without a broker where we explain the process in more detail.


About the Author

Anthony Gallagher

Broker Expert

Anthony is a financial journalist and business advisor with several years’ experience writing for some of the most well-known sites in the Forex world.

A trader turned industry writer, he is currently based in Shanghai with a finger on the pulse of Asia’s biggest markets.

He is a keen golfer with a very high handicap so when not helping you find the best broker for your needs, you may find him on the course or just as likely following any number of sports from the comfort of his sofa.


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