Foreign currencies traded in the forex market are traded directly between banks, brokers and investors wishing either to diversify, speculate or to hedge foreign currency risk. The forex market is not a “market” in the traditional sense due to the fact that there is no centralized location for FX trading activity and, therefore, trades placed in the forex market are considered over-the-counter (OTC). Forex trading between parties occurs through computer terminals, exchanges and over telephones at thousands of locations worldwide. Retail clients mostly trade through a professional forex broker.

Forex brokers, unlike equity brokers, do not take positions for themselves; they only service banks. Their roles are to bring together buyers and sellers in the market, to optimize the price they show to their customers and quickly, accurately, and faithfully executing the traders’ orders. The majority of the foreign exchange brokers execute business via phone using an open box system — a microphone in front of the broker that continuously transmits everything he or she says on the direct phone lines to the speaker boxes in the banks. So, all banks can hear all the deals that are being executed. Because of the open-box system used by forex brokers, a trader is able to hear all prices quoted; whether the bid was hit or the offer taken; and the following price. What the trader will not be able to hear is the amounts of particular bids and offers and the names of the banks showing the prices. Prices are anonymous. The anonymity of the banks that are trading in the market ensures the market’s efficiency, as all banks have a fair chance to trade.

Seasonal Forex brokers analyze with a more technical relevance than an amateur trader would, and would make sure of the percentages of profit are good despite a few losses. Again forex trends are just indicators; they cannot earn or guarantee profits. Trend only assures that the average trend moves in a particular direction up or down. It is not realistic to make such profit every month depending on trend. Trend changes will reflect on your trading system a little late, so being on the cautious side is always advised. Trend is required to be updated on a regular basis for it to work for you. Most traders forget this rule since they feel holding position is more important than taking pains of adding another trade. They normally open a trend after closing the previous one. It is not the correct practice to success. Updating trend after consultation and proper analysis is one of the most effective ways of becoming a successful Forex trader.

Forex brokers charge a commission to be paid equally by the buyer and the seller. The fees are negotiated by the bank and the brokerage firm. Brokers show their customers the prices made by other customers, either two-way (bid and offer) prices or one way (bid or offer) prices from his or her customers. Traders show different prices because they read the market differently; they have different expectations and different interests. A broker who has more than one price on one or both sides will automatically optimize the price. In other words, the broker will always show the highest bid and the lowest offer. Therefore, the market has access to an optimal spread possible. Fundamental and technical analyses are used for forecasting the future direction of the currency. A trader might test the market by hitting a bid for a small amount to see if there is any reaction. Another advantage of the brokers’ market is that brokers might provide a broader selection of banks to their customers. Some European and Asian banks have overnight desks so their orders are usually placed with brokers who can deal with the American banks, adding to the liquidity of the market.