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What is a Forex Trading Desk – Understanding the Art "business" before choosing your Forex Dealer
What It is a Forex Trading Desk
Before trading in the Forex Market, it is important that you understand how the negotiation process. You should also take the time to investigate several dealers before opening an account.
Forex traders are considered market makers counter. It this means is that when you buy a currency pair, you are selling that pair. Similarly, when you are selling a currency pair, they are buying that pair.
Its trading platform "date" that the price the dealer is willing to buy or sell foreign exchange for the contract.
What you will notice, and this impression can be a bit strange is that all prices quoted by different dealers will be almost identical. How can it be if all the distributors are independent from each other?
The reason for this is that all dealers are current prices in each pair of currency of one or more banks that have a relationship with. The banks get their prices through the interbank market. In fact, most traders use large banks themselves. So at that level at which we are all seeing the same prices.
Note that this agreement does not mean you are dealing directly with the interbank market. Many traders will, intentionally or not, I leave you with the impression that when trading an account with them you are getting direct access to the interbank. It never is. The distributor is responsible for the operation and needs to be compensated by anyone. And you always compensates them when trading. What It is a Forex Trading Desk
One of the attractive aspects of trading the currency market is that you do not pay a commission as it does in stocks and options. You, however, pay a spread. It is the extension that goes to the dealer and how they make their money.
The spread is the difference between the price paid by a contract (offer) and the price paid when the contract in that same pair is sold (the question). (This is similar to the bid and offer prices for a single population.) Many traders overlook this seemingly insignificant cost for opening or closing a trade, but it should not. All expenses, including smaller add up and can determine whether you will be a successful entrepreneur.
Forex Dealers can set the price of the currency in one of several ways. When shopping to find a dealer if they offer fixed spreads or spreads variable.
Merchants that offer fixed or "coherent", spreads are generally wider than the differentials that are charged to the bank (s) used as its agent. This difference represents a significant portion of their income. What It is a Forex Trading Desk
A seller offering a variable spread usually offer you a margin narrower than what is offered by a dealer fixed-spread but beware! This distribution will expand significantly the volatility of the markets.
Dealers are not in the business of making money on changes in the movement of the pairs. Your money is made by processing and executing the transaction through spreads. Therefore, when opening a long position in the EUR / USD, for example, that are selling the pair to another participant in the interbank market to offset its trade.
You also do not want to be deceived by the claims made by dealers who will get better prices because they are not developing a business through an operating table. It may not be your desktop that will land on your business – but at some point come to an operating table.
The last point worth making is that you gain no trade advantage through Electronic Clearing network (ECN). Although I will show the bid and ask prices that are above or below current price of any particular pair still can not guarantee that its operation will be executed at that price and, in many cases, dealers are seeing the same thing. What is a Forex Trading Desk
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