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Online forext trading, forex broker trading guide

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forex_tips | 03 August, 2006 14:35

The majority of the foreign exchange (FOREX) brokers I know execute business via phone. The phone lines between brokers and banks are dedicated, or direct, and are usually installed by the broker. A foreign exchange brokerage firm has direct lines to banks around the world. Most foreign exchange is executed through an open box system - a microphone in front of the broker that continuously transmits everything he or she says on the direct phone lines to the speaker boxes in the banks. This way, all banks can hear all the deals being executed.

Because of the open box system used by brokers, a trader is able to hear all prices quoted; whether the bid was hit or the offer taken; and the following price. What the trader will not be able to hear is the amounts of particular bids and offers and the names of the banks showing the prices. The fees are negotiated on an individual basis by the bank and the brokerage firm. FOREX Brokers show their customers the prices made by other customers either two-way (bid and offer) prices or one way (bid or offer) prices from his or her customers.

Traders show different prices because they "read" the market differently; they have different expectations and different interests. A broker who has more than one price on one or both sides will automatically optimize the price. In other words, the broker will always show the highest bid and the lowest offer. Therefore, the market has access to the narrowest spread possible.

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