Brokers can also be interpreted as liquidity providers.
We’ll start with the basic concept of liquidity.
For example, you want to exchange — in other words, buy a certain amount of a particular currency.
In order for you to buy currency, someone has to sell it to you.
In order to sell currency, someone must be willing to buy it from you.
If many people want to buy the currency you are selling, you can sell the currency.
If many people sell the currency you want to buy, you may be able to buy the currency you want.
When there are a large number of buyers and sellers in the market, it means that the market is “liquid”.
There is another type of circulation in the market.
For example, you want to buy currency, but instead of many individuals selling a small amount of currency, you have fewer sellers selling a large amount of currency.
The market is still in circulation.
These sellers who sell large amounts of money are called liquidity providers because they actually provide liquidity in the market — large banks or financial institutions that trade money on a large scale.
In other words, they trade a lot of money, so when you sell money, you are likely to sell money to a liquidity provider, and when you buy money, you are likely to buy money from a liquidity provider.
They trade a lot of money, so they are always on the side of the deal.
When a broker forwards your trade to a liquidity provider, it means that the broker matches your contract with a liquidity provider, such as a bank or another financial institution, to act as the other side of your trade.
