In the financial world, there are brokers who receive orders from both retail and corporate clients. In the Forex market, currency trading brokers act as an intermediary between customers and the highly capitalized inter-bank market where currencies are traded. Brokerage firms deal with their customers directly through entities or individuals known as introducing brokers or IBs, in short. The IBs are responsible for introducing customers to retail brokers who proceed to set up an investor account for the trader. Introducing brokers can be viewed as futures brokers or commodity brokers.
As the name implies, introducing brokers constitute the customer care arm of the dealing firm or forex broker in our case. They provide additional customer support to the clients and brokerage firms. The brokerage firm relates closely with the IB to not only drive its business but also gain a strong following, trust, and reputation from the client community. The IBs are compensated through commissions, which is usually a pre-agreed portion of the spread for every trade their clients make.
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Introducing brokers provide help to customers who open accounts with their offices and do not have a complete understanding of the risks associated with the financial markets. This helps novice investors avoid making mistakes during the trading process, which might cost them their hard-earned money. Clients working with an IB can easily evaluate market moves and identify potential trading opportunities. Introducing brokers offer their clients valuable services and benefits that the public does not have. These include access to research and training resources, better understanding of the market regulatory changes, and expertise to develop an effective trading strategy, all set to help customers meet their needs.
Most forex traders are skeptic about using introducing brokers because they are simply viewed as “middlemen”. However, this is not the case. An introducing broker never holds your funds nor alter the trading process in any way. In fact, they work to your benefit. Here are three of the greatest benefits you can realize when working with an IB.
1. Value Added Services – Introducing Broker offer helpful services to their clients for free. They include trading guides, advanced charting software, free eSignals and account management strategies. If well utilized, these services can bring significant improvements to your net profit.
2. IB Leverage – The level of customer support is very inconsistent at times, especially at the ground level operations. In such a scenario, traders who deposit less than $20,000 USD in their account are at the bottom of the firm’s priority list. However, when using an IB, chances are that they will back your claims and help resolute the problem even if you are a 10K client.
3. Volume Based Trade Rebates – Some IBs offer their clients a worthy rebate upon executing every trade. Although the amount of rebate depends on your volume of trading, you can use it to preserve your capital or otherwise, tighten the spread.
Introducing brokers are therefore instrumental if you wish to succeed and stay on the top of the rapidly growing financial market. Furthermore, you are protected as IB’s are required to obtain licenses from relevant regulatory entities before soliciting businesses for clients.