Forex and CFD Broker Comparison 2022

The services and offers of most brokers are similar. However, there is one key difference in how a broker works. This affects the course formation. A market maker sets the prices themselves and passes them on to the customers. An ECN broker, on the other hand, passes on its courses to a pool of banks.

A market broker sets the bid and ask price (sales price and purchase price) itself. The price is formed by the trading activities of the traders or the trades that have been completed. The spread is thus the earnings of the broker. The spread may differ depending on the market situation and the instrument.

In contrast to the market maker, the customer is directly integrated into a network with an ECN (Electronic Communication Network) broker. Orders are placed in the broker's order book registered. By accessing the order book you can view your orders, not only seeing the price, but also how much volume at a given price is requested. Since the price here is formed from supply and demand, it is possible that the spread is 0. Orders are executed directly on the market. A disadvantage is that the minimum deposit with ECN brokers is usually higher than with market makers. Since the ECN broker does not earn anything from the spread, a commission is incurred. Scalping is at ECN brokers allowed.

Basically, Forex offers the possibility to speculate on the exchange rate between two currencies. The aim of a trader is to make a profit when the price of a currency pair changes developed in the assumed direction. Stock market news or political events can often be used to deduce the direction in which a course can develop. With a turnover of more than 4 trillion dollars (US dollars), Forex is the world's largest market.

The difference to other stock exchanges is that a trading center is open somewhere in the world at any time (24 hours a day) and can therefore be traded around the clock. There is only a short break in trading on the weekends. Due to these long trading hours, the trader has the opportunity to organize his trading day himself.

The most important Forex exchanges at a glance (New York time zone):

• Tokio: 7:00 PM – 0:00 GMT
• London: 3:00 AM – 17:00 GMT
• New York: 8:00 AM – 22:00 GMT

Forex trading begins every Sunday between 11:00 p.m. and 11:15 p.m. (German time zone). Trading closes at 11 p.m. on Fridays. Meanwhile, order placements and prices are continuously possible.

The basis of the forex market is that currency pairs can be bought and sold. You can speculate on rising prices as well also on falling courses. The aim is to make profits by buying and selling correctly. A trade with foreign exchange works analogously, like a trade on other exchanges. If you have already gained experience on other exchanges, switching to Forex is usually not difficult.

Trading Example:

A broker sells 2 mini lots (1 mini lot = 10,000) of the EUR/USD currency pair at a rate of 1.65378 (stake: 20,000 euros). 2 months later he closed the position again with a profit of 4308.4 pips, which is a profit of $4308.

Whether you buy or sell always depends on the development of the price, or whether you assume that a price will rise or fall. It is a key advantage in forex trading that one can make a profit with falling prices as well as with rising prices. For example, if you follow a report on the development of the DAX price, a falling price is described as negative. Man should keep in mind, however, that a falling price is not negative for every investor. The traders who expected the price to fall have sold (go short) the value and can now close the order with a profit. It is therefore only necessary to correctly assess the development of a course and to act accordingly - the direction is irrelevant. If buying an asset is called going long and selling an asset is called going short. If one expects a falling course one would the respective value sell (go short). If a rising price is expected, buy the value (go long). If the expected price development occurs, you can close the order at any time with a profit. In order to limit the loss when the price moves in an unexpected direction, it is advisable to work with stop/loss.