Through the interbank market, currency pairs are priced. This is a communication system that large banks and financial institutions use without a central exchange such as the NASDAQ or the New York Stock Exchange. Also, forex brokers get their cues from the said transactions, but they do not need to offer clients the most reasonable interbank bid or ask. They could purposely show wider spreads with less favorable prices, adding to profits after completing the trades through the system.
Furthermore, prospective clients can look for conflicts of interest by reviewing the trade execution process at the website of the broker.
Notably, a trader must determine if the broker has a dealing desk that creates a market, taking the different side of a client trade. Then, a more reliable broker would share quotes directly from the interbank system through a wholesale liquidity provider or electronic communications network (ECN). This handles the exact buy and sell transactions. These are third party companies with straight-up connections to the professional system.
All forex traders open and close positions through the broker’s trading software. And this needs to include a mix of stand-alone, web-based, and mobile platforms. MetaTrader has also been mounted as the industry standard for stand-alone software in recent years, giving a robust feature set that has real-time quotes, news, price charts, research, and customizable watchlists.
In addition to that, web-based trading presents an alternative to stand-alone software. Still, it has fewer features most of the time, requiring account holders to access other resources to finish their trading strategies.
Now, mobile apps provide the most convenient bet fewest bells and whistles in a slimmed-down design that typically lets one or two-click trading. Whenever possible, it is best to use the full-features stand-alone software. With that, it saves the entire mobile experience for times when a trader is away from the trading desk.
Many forex brokers offer demo accounts that allow prospective clients to look at the stand-alone web interface and mobile platforms. With that, it lets them trade forex pairs with play money. Also, this software shows the same quotes, charts, and watchlists as the real system. Thus, it makes it an invaluable resource to examine the broker’s bid and ask pricing quality.
Always be suspicious if a broker does not offer any demo account because it might be using an inferior or outdated platform.
Also, place some of these accounts side by side with real-time quotes from a giant financial site. And a trader will immediately see which brokers are offering the best bid and ask prices under normal market conditions. Besides that, try to at least take a second look after the Federal Reserve rate decision or other market-moving events to see how the currency pairs move in highly volatile conditions.