Don't contact your broker for trading currencies online - your forex system does it !

When you are trading currencies online, you are actually connected to millions of other forex traders. For example, when you are day trading any currency pair, you are connected to a live world wide centralized electronic exchange system, and you do not need to contact your broker for placing any buy or sell order. The online market is run by market makers, who are continuously matching the price between buyers and sellers and executing your orders. Your broker merely connects you to them through the trading platform.

There are many market makers across the world, who have a steady stream of buy and sell orders at any instant from millions of traders and other buyers and sellers of currencies engaged in trade, travel or business. Some of the biggest players in the forex arena are actually the central banks run by the governments of many countries, whose orders are typically huge, often in millions of dollars. It' a shame, that the banks make millions of dollars of profits through speculating with your hard-earned savings on the forex market, but pay you only a measly 2-3 % interest on your capital.

The buy and sell rates for any currency pair generally tend to be nearly the same across the world for different market makers, despite the fact that there may be momentary fluctuations between market makers. But being a completely online system, these differences are smoothed out within a matter of minutes to seconds.

Therefore you do not have to rely on a broker for getting you the best rates, as they are already out there on your forex system as we speak. A broker is not needed for finding buyers or sellers in foreign currency trading as the market is always liquid, at least for the major currency pairs. Buyers and sellers are always in a queue waiting for the best prices to buy or sell. The worldwide forex exchange is like a gigantic auction house.

However, it is important to understand that most forex brokers will often add their terms and conditions for trading through their respective platforms. The bid-ask (buy-sell or long-short rate) difference in pips vary, and will diminish your profits significantly if its substantial. Pips stand for percentage in point. It is the smallest price change that a given currency exchange rate can make. It is the equivalent of 1/100 of 1%.

The way you can place orders ( market, limit, OCO or one-cancels-other, stop loss, guaranteed stop loss, trailing stop loss, etc.) also vary hugely amongst brokers.

Choosing the right broker takes experience, but can make a significant difference to your profitability.