What is a dealing center?
Forex is meant to make large currency transactions. Dealing centers provide an ability to trade in the foreign exchange market for small players. They are commercial non-bank institutions providing access to Forex traders who do not have sufficient funds to independently enter the market.
Essence of the dealing centers
A dealing company collects applications for purchase/sale of foreign currency from their customers, combine them, and output to the international currency market. At the same time, they trade in Forex on their behalf fulfilling the payment orders of clients.
What services does a DC provide?
To begin work with a DC, a trader should open a trading account. Afterwards, he will have access to the trading platform (Metatrader, Power Trader, etc.) and be able to conduct trading operations. In addition, a trader gets an ability to use analytical data, training materials, and other services to increase the efficiency of the Forex trading.
If a trader wants to make more profit, but do not have enough own funds, dealing centers give short-term loans called leverage. This service allows you to increase a deposit a several hundred times significantly expanding its trading opportunities. For all the provided services a dealing center charges a fee.
How is profit of a DC formed?
Purpose of the dealing centers as well as other commercial companies is to make a profit. It is formed by the following three sources:
- Spread – the main source of income, which represents the difference between purchase and sale of the foreign currency. A similar profit mechanism is practiced by the currency exchange. Spreads can be fixed or variable.
- Swap or rollover – charge for transferring open positions to the next business day. A part of swap is paid to banks and another part is taken by a dealing center.
- Additional services – training, providing trading signals, analytical data, etc.
Dealing centers provide a large number of tools to simplify decision-making in trading. However, they get profit regardless of the trading results of their clients. Therefore, traders must rely solely on their knowledge, experience, and effectiveness of the chosen trading strategy. However, comfortable trading conditions are an important part of successful Forex trading. Therefore, choice of a dealing center should be approached very carefully.
How to choose a dealing center?
Nowadays, there is tremendous competition in the dealership services. To choose the most suitable option among a huge variety of dealers, you need to pay attention to the following characteristics:
- Duration. The longer the dealership works in the market, the better for a trader. Do not trust companies with the term of existence that does not exceed 1 year.
- Availability of regulatory and registration documents. Dealers unable to provide data on conditions of its activity, registered address, etc. should not be trusted.
- Trading conditions. When choosing a dealing center, one should be sure to check spread, swap, account opening procedure, and quality of a particular trading platform. If a company offers very favorable conditions (super swap, no rollover fees, etc.), it may be a scammer.
- Deposit/withdrawal methods. Depositing and withdrawing funds from the account must be user-friendly and provided without delays. In addition, presence of fees for these transactions is possible.
The best way to test comfort of cooperation with a particular dealing center is to open a cent account on its platform and test trading conditions.