How Forex Brokers Make Profit

When talking about the forex business, one of the key players in this business is a forex broker. Playing forex or trading foreign currencies requires a broker who is a professional company that can also be in the form of an agent, institution, or individual whose function is to bring together the seller and the buyer is buying and selling foreign currency (forex) transactions. You can get a broker that knows about the Volatility 75 Index on http://www.cnie.org/forex/volatility-75-index-brokers.html.

In the world of buying and selling foreign currencies, in reality, this activity is dominated by large banks from all over the world. With the world’s major currencies such as the US, Yen, Pound, and Euro, a large portion of currency buying and selling transactions is dominated by the central banks of these major countries. Therefore, because we are running a forex business with a limited nominal and small scale, it is not possible to make transactions with these large banks.

What’s more, we also need a liaison with these big banks where there is a minimum nominal limit in order to make transactions with these big banks. This is where the role of the forex broker is needed. Forex brokers can serve retail transactions which will make it possible for each individual trader to make forex trading. In practice, this retail forex broker will forward requests from traders to larger brokers, and so on until every trader’s request can be accommodated in the forex market.

In the world of forex brokers, each company has different rules in setting fees for their services in forex trading.

Forex brokers who take a fee from each lot of transactions that occur between sellers and buyers,
Forex brokers who only profit from the difference/spread between buying and selling. Generally today forex brokers use the difference spread

Brokers make profits which are expressed in pips, where the 2-3 pips figure is pretty much used by forex brokers for the US, Euro, Yen, and Pound currencies, and will usually take more than 5 pips for secondary currencies. However, the broker’s profit is not yet a net profit, because it will still be deducted for operational costs, fees to larger brokers, and commission fees to agents.