A Dealer is someone you can’t avoid when trading in the forex market. But who exactly is a dealer, and why do they matter so much? 

If you have ever wondered who is on the other side of your forex trades or who makes buying and selling currency so easy, then you are about to find out. 

Some people think dealers just process trades, but the truth is, they do a lot more than that. 

In fact, they play a major role in how the forex market operates. Want to know how? Keep reading.

What is a Dealer in Forex?

In forex trading, a dealer is a financial company or an individual that takes the opposite side of your trade. 

This means when you buy, the dealer sells, and when you sell, the dealer buys. Unlike brokers, who only connect buyers and sellers, a dealer actually trades with you. 

This is why they are also called market makers, because they create the market where you trade.

How Dealers Work in Forex

Forex dealers operate by offering buy and sell prices for currency pairs. They make money through the spread, which is the small difference between the buying price (ask) and the selling price (bid). 

For example, if the EUR/USD currency pair has a bid price of 1.1050 and an ask price of 1.1052, the dealer keeps the 2-pip difference as profit.

Unlike retail traders, who trade to make a profit from price movements, dealers focus on providing liquidity to the forex market. 

This means they always ensure there is enough currency available for traders to buy or sell at any given time.

Types of Forex Dealers

There are two main types of dealers in forex trading:

1. Retail Dealers (Market Makers)

These are financial companies or forex brokers that provide prices for retail traders like you. They allow you to buy and sell currencies instantly, without waiting for another trader to take the other side of your trade. However, since they control the price quotes, they can sometimes adjust spreads or execution speed.

2. Institutional Dealers (Big Market Players)

These are large banks, hedge funds, and financial institutions that trade huge volumes in the forex market. They operate at a higher level than retail traders and provide liquidity to the entire forex market. Some well-known institutional dealers include JPMorgan Chase, Citibank, and Deutsche Bank.

How Do Dealers Make Money?

Dealers earn money in several ways:

• Spread Profit: The difference between the bid and ask price is the dealer’s main source of income.
  
• Taking the Opposite Trade: Since dealers trade against you, they sometimes make money when retail traders lose.
  
• Markups on Spreads: Some retail dealers increase the spread slightly to make extra profit.
  

Why Do Dealers Matter in Forex?

Without dealers, forex trading would be difficult. They ensure that traders always have someone to buy from or sell to. 

Dealers also keep the market moving, making it possible for you to enter and exit trades smoothly.

However, traders should always be careful when choosing a dealer. Some retail dealers may manipulate prices or delay trade execution to increase their profit. 

That’s why it’s important to trade with a reputable dealer that offers fair pricing and fast execution.

Conclusion

A forex dealer is not just someone who processes your trades, they are a key player in the forex market. 

They provide liquidity, set prices, and ensure smooth transactions for traders worldwide. 

Whether you are trading with a retail dealer (market maker) or dealing with large institutions, understanding how they work can help you make smarter trading decisions.

Now that you know what a dealer is, are you ready to trade smarter in the forex market?