Trading Forex Online vs With a Private Broker

This is a brief look at trading forex online vs trading forex with a private broker.

Trading forex used to be the exclusive preserve of financial institutions and a few privileged high net-worth individuals. Trading was primarily done using private brokers. In that process, orders were given to brokers by written or telephone instructions and the orders were then sent to the trading rooms where they would be executed on the client’s behalf.

All this changed in the 1990s when advancements in information and computer technology brought about the development of new software for banking and financial trading. Software that could enable direct online access to the financial markets came on stream, and legislation that opened up market participation to include the average Joe on the street were enacted. The era of trading forex online was born.

There are advantages of trading forex online as opposed to trading forex with a private broker.

For instance, it is now possible to trade forex directly from your personal computer. Indeed as I write this, I have trade positions I am monitoring. The hassle of making phone calls to place orders and endless waiting periods for trade executions has been eliminated by this singular point. You can trade when you like, at your own convenience.

Trading forex online has also created healthy competition among brokers, who now must provide superb services to the consumer. Who wins ultimately? The consumer does. You can easily walk away from a broker whose services are unsatisfactory, to a more diligent one. There is increased power to choose.

Trading forex online, which is a product of the deregulation of the market in 1997, has opened up the playing field to small investors. You do not need to control the billions that hedge fund traders like George Soros have access to in order to trade forex. This is perhaps one of the greatest advantages that trading forex online has given us. Only traders of the caliber of George Soros were able to make money from the collapse of the British Pound in 1992, but thanks to online forex trading, small players can make money from big forex moves such as the ones that have occurred in the Swiss Franc pairs following the introduction of the minimum exchange rate peg in September 2011.

Lastly, trading forex online has provided an opportunity that hitherto never existed, for the average Joe on the street to add another income stream to their lives, and to do it in a way that is accessible and relatively devoid of the stress that was obtainable with private forex brokerage.

However, it should be noted that trading forex online also has its drawbacks. You are basically anonymous, and it is difficult to get the kind of personalized attention that those who trade forex with private brokers get.

In addition, private brokers usually provide value-added services to their clientele, such as trade recommendations. Private brokers can afford to do this as they make money from the trade commissions of their clients and not through market making like online forex brokers do.

So ultimately, it is a matter of choosing what is right for you. Most of us will not be able to afford to use private brokers, so try to make the best of your online forex broker. If you are a high net-worth individual, then using private brokers may be the best option for you.

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