Do you understand your market?
In my previous articles, I described developing a trader's mindset and putting together a mission statement.
Now we need to consider the next three aspects of building a trading business.
1.What online broker to use.
2.What size account we need to fund.
3.What markets or currency pairs we want to trade.
Since this series of articles is focused on the Forex markets, we need to examine and understand the role of the online retail market makers, and how we as traders, interface with them.
Online Brokers
Online brokers are companies that have relationships with a select number of banks. Based on their own capitalization and credit worthiness, they are able to establish lines of credit with these banks that then provide them with access to their bid and offer prices. A good online market maker will aggregate a number of bank quotes and then offer the average bid and offer price to their own customers, after adjusting the spread they receive, to allow for some profit for themselves. The bigger the volume they can trade, the better the spreads they receive from their banks. It's a numbers game. But for the online trader, the counterparty to his trade is his market maker and not the banks directly ...continued
