A Forex Broker acts as the "middle man" between buyers and sellers of a particular currency. If you are familiar with trading stocks, you'll be used to a commission for each trade, but in Forex, brokers typically do not charge commission per trade. This means that they probably earn their income by raising the spread by a few points (or pips), which is the difference between the buy and ask price.
I like to compare brokers on a few different criteria, like each particular spread level. If a broker offers fixed spreads it means the quoted spreads stay the same no matter what the market condition. Variable spreads on the other hand will be lower when there is less market activity or in off hours, and is widened during more active market periods. This is not against any rule or designed to scam you out of money, this is just the basic practices all Forex Brokers adhere to, no broker is in fact perfect, where one Forex broker is strong it could be weak compared to another Forex Broker.
Traditionally, Forex brokers were extensions of large financial institutions or banks which is understandable do to the large sums of money traded each day around the world.
Since the late 1990's we've seen an emergence of Over The Counter (OTC) Forex Brokers Online, who offer trading capabilities to we the retail traders. Most Forex brokers offer their own platform, while others allow you to use a universal Forex charting software like MetaTrader 4. Thanks to this, as long as a trader has a computer with a computer and an Internet connection, he would be able to trade Forex with anyone in the world at any time. The Forex market is to the equity markets, except that forex brokers do not charge a commission. However, Forex brokers are required to be licensed by the government of the country they operate in. Please note that Forex brokers are required to register with the Futures Commission Merchant (FCM) and if you find one that is not, please report it, Forex brokers are further regulated by the Commodity Futures Trading Commission (CFTC).
Gives you a good overview of Forex Broker Facts.
| Forex Broker | Min Deposit | Commission | Max Leverage | Since |
|---|---|---|---|---|
| FX Cast | $1 | N | 400:1 | 2005 |
| Dukascopy | $50,000 | N | -- | 2004 |
| Forex Club | $10 | N | -- | 2000 |
| FX Open | $1 | N | 500:1 | -- |
| Marketiva | $1 | N | -- | 2005 |
| Swissnet | $200 | N | -- | 2005 |
| Ava-Fx | $100 | N | 200:1 | 2006 |
| Real Trade Group | $20 | N | -- | 2003 |
| Easy-Forex | $50 | N | ??? | 2001 |
| FXCM | $300 | N | 200:1 | 1999 |
| FX Solutions | $250 | N | 400:1 | 1995 |
| iForex.com | $100 | N | 400:1 | 1996 |
| Hotspot FX | $7500 | $3/100k | 50:1 | 2000 |
| Forex.com | $250 | N | 200:1 | 1998 |
| CMC Markets | $2000 | N | 100:1 | 2003 |
| Realtime Forex | €2500 | N | 50:1 | 2001 |
| Interactive Brokers | $5000 | $2/100k | 50:1 | 1998 |
| GFT Forex | $250 | N | 400:1 | 2001 |
| EFX Group | $400 | $5/100k | 100:1 | 2000 |
| MB Trading | $400 | Y | 100:1 | 2002 |
| LiteForex | $1 | N | 500:1 | 2004 |
| Oanda | -- | N | 50:1 | 2001 |
| MG Forex | $200 | N | 400:1 | 2000 |
| CBFX | $500 | Y | 100:1 | 2001 |
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