Using a Reading Broker
Using a Reading Broker – A reading broker is a full service bookbroker that buys and sells US and foreign currency. These brokers can either be found online or in your local telephone book. A reading broker will take commission per transaction and most of these brokers charge an up-front book commission. This means if you are selling US dollars and someone comes to you directly, you will only be charged a small discount for buying that person’s books.
A full service broker usually offers more of a personal touch than full service brokers. They can help you with the whole buying & selling process as well as get you the best deal possible. This is great if you do not trust your own judgment, as you can have a knowledgeable person who knows how to buy the foreign currency that is right for you on your side. A reading broker is happy when an order gets filled and will be happy if it doesn’t get filled at all. This is because the commission for the order is smaller, usually around 2-5 percent of the entire deal.
These brokers typically do not take a small commission, but instead charge something called a “bid” price or sometimes “ask” price. This is what the broker is trying to beat, and has no interest in losing money. Most full service brokers do not make any money, so either keep this in mind or decide when considering full service brokers that there is a lot of money to be made in forex talked shows such as CNBC and Bloomberg.
A more recent alternative to a full service bookbroking business is the online foreign exchange broker that is easy to set up, doesn’t require high minimums to get started, and full gains in membership fees.
An online foreign exchange broker makes money on the margin that is calculated by the bid/offer spread difference. Just because a broker may not be making any money due to a small difference in prices between bid price and offer price, this does not mean they are not making money.
A margin is just the collateral needed in order to buy (go along with buy) foreign currency. If you call your broker to place a buy line, you will know what the margin requirements will be. The more you want to trade, the larger the margin will be for you.
In most cases, the person who is reading out the bid/offer prices online works for a Living on the basis that to be successful in the foreign exchange market, you will need to have constant access to prices. The bid price is the price at which trades can be executed, and the offer price is the price at which you can close the trade. This is an essential tool for anyone trading in the forex market.
This shows you why FX trading is such a popular and lucrative form of trading. Currencies remain volatile and as well as, the market is so liquid that you are able to lock in your profits quickly compared to waiting, and move your capital into a more liquid position.
Equity trading in foreign currencies is an exciting form of trading when there are opportunities every day for mid-sized and large investors. Because of the risks involved and the simplified nature of this market, the trades are usually done by the bank and businesses or high level traders. Traders with larger capital go with the banks or larger financial institutions.