A market maker is one who maintains firm bid and offer prices, guaranteeing liquidity for a particular currency pair, and stands ready to buy or sell that currency at the quoted price. He usually gets quotes for an instrument from multiple sources, such as large banks and exchanges.
Most online Forex brokers function as market-makers, meaning that the broker is on the other side of every trade. This means that the broker will take on the other side of the trades – when you go long, you’re buying from the broker; when you sell short, you’re selling to the broker.
When the market maker is the counter-part to your trade, he has the option of either holding that position or offsetting it with other market participants, managing their aggregate exposure to their clients.
If a market maker chooses to keep a trader’s position without offsetting it in the market, the trader’s profit is the market maker’s loss and vice versa.
Most brokerage firms that are market-makers generally provide consistent liquidity and execution. This allows you to trade your desired amount at all times.
Choosing to trade through a Forex market maker comes with several benefits. Such brokers typically provide:
- on-line live charts;
- technical analysis;
- market news, outlooks and projections;
- educational tutorials.
Such benefits come in handy especially when we’re talking about novice traders, but intermediate and advanced traders will also need a trustworthy source of market news and outlooks on what drives the markets at specific times.
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