Introducing broker Forex, not too long ago, the industry used to be like the wild west – anything went. Forex brokerages use to take anyone on as an introducing broker (IB) so long as they brought in traders.
Now, the more reputable brokers only tend to take IBs who are registered with some regulatory body like the NFA or the CFTC.
An IB is often viewed with skepticism by traders as a kind of middle-man, and technically, they are.
They are middle-men who drive business to a brokerage, and in return, they make a commission on the spread on trades made by their clients.
So what's in it for the trader? Introducing brokers Forex actually increase your chances of trading success for a number of reasons.
For one thing, IBs have more clout with the Forex brokerages. Suppose you have $10,000 in a trading account at a major brokerage. If something goes wrong and your trade orders are hit with slippage, you might lose your shirt, and it will be up to you to call the brokerage and get the problem fixed. With most brokerages, if you have an account with $20k or less, your problem isn't really going to be high on their priority list.
But if you open a trading account through an Introducing broker Forex, then chances are that the IB has many clients with that brokerage, and his funds under management will be in the neighborhood of $500,000 or more. This means that if you have a problem, you can speak directly with your IB and he will have a lot more pull with the customer service people than a trader who opened a small account would have. In short, you are more likely to have your problem resolved if you have an IB.
Another way Introducing brokers Forex are beneficial to the small-account trader is through all the perks that good IBs can offer their clients. Some may offer you advanced trading charts and software free of charge, and these can dramatically improve your trades. The services you get for free through IBs usually cost money if a trader signs up for them on their own.
Another perk is that since all IBs are paid each time their client makes a trade, some IBs – especially those with a large enough client base – will offer their clients a rebate on every trade their clients make. But traders, especially new traders, should be wary. IBs usually advise their clients to make a lot of trades, because the more you trade, the more the IB will make (regardless if you make money or not).
So, although there are many advantages to using the services of an introducing broker Forex, there are certain risks associated with them. The most important rule of thumb is that you get to know your IB before signing on with them, and that you pick someone you can trust.