Where are these currencies traded in the forex market?
The good part about forex trading is that you don’t have to “literally” exchange money or set up foreign bank accounts or any of that nonsense. No, it’s as simple as opening up an account with a forex dealer (aka market maker…some even refer to them as brokers). They aren’t technically brokers and that’s why there’s not a commission in this market. It’s because you are dealing directly with the market maker. Market makers charge spreads (the difference between the buy and sell quote…which we’ll delve into more later) and brokers charge commissions.
In your stock brokerage account, you incur a buy commission from your stock broker, a spread cost from the market maker and a sell commission from your stock broker. So there are three fees by the time you’ve bought and sold a stock. However, in forex, you don’t have the commissions and even the spread you pay is less than that of stocks when you consider how much currency you are controlling.
The good part about forex trading is that you don’t have to “literally” exchange money or set up foreign bank accounts or any of that nonsense. No, it’s as simple as opening up an account with a forex dealer (aka market maker…some even refer to them as brokers). They aren’t technically brokers and that’s why there’s not a commission in this market. It’s because you are dealing directly with the market maker. Market makers charge spreads (the difference between the buy and sell quote…which we’ll delve into more later) and brokers charge commissions.
In your stock brokerage account, you incur a buy commission from your stock broker, a spread cost from the market maker and a sell commission from your stock broker. So there are three fees by the time you’ve bought and sold a stock. However, in forex, you don’t have the commissions and even the spread you pay is less than that of stocks when you consider how much currency you are controlling.
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