There are many brokers in the foreign exchange market, such as market makers and brokers. On the surface, they are both businessmen, so in the actual foreign exchange operation, the difference between market makers and brokers mainly lies in their different trading modes. There is no trader's intervention in the trading of foreign exchange brokers, but there may be trader's intervention in the market-making mechanism. In addition, it should be noted that the spread of foreign exchange brokers is generally greater than that of market makers, mainly because the former's income source is spread, while the latter mainly comes from spread and investors' losses.
2. A foreign exchange broker can be simply understood as a middleman or a middleman. They just connect the foreign exchange market with investors' tools and earn a spread or commission from it to make a profit. Under the foreign exchange broker model, all investors' orders are actually traded in the foreign exchange market. If it is a foreign exchange broker, it can be understood as a separate intermediary, because its main purpose is to connect the foreign exchange market with investors and earn spreads and commissions from it. Foreign exchange market makers are typical customers. After placing an order, the relevant platform will reverse hedge in the real foreign exchange market, so if the investor makes a profit, then the platform will lose money. On the other hand, if investors lose money, then the platform will be profitable.
How do market makers make money?
1. Market makers make money by compensating the service cost provided by the appropriate difference between bid and offer. For example, a market maker is equivalent to a banker. Retail investors lose money, then market makers make money, and vice versa. If retail investors make money, then market makers will lose money. Moreover, it should be noted that the decisive factors that generally affect the bid-ask spread of market makers include the trading volume of market-making securities, the volatility of securities prices, the prices of securities varieties and the pressure of market competition.
2. Market makers only need to quote the price, and buyers and sellers can buy or sell at this price without waiting for the appearance of counterparties. In addition, market makers need strength, and market makers need to have certain professional knowledge and strength to make money by compensating the service cost provided by the appropriate bid-ask price difference.