Traditionally forex trading occurred between large banks and a select few large financial institutions and was completely outside the reach of retail investors, purely because retail investors do not trade at volumes nearly high enough to attract the interest of banks. The latter part of the 20th century has however seen the emergence of the forex broker.
A forex broker acts as an intermediary between you, the retail currency trader, and the bigger institutions that trade forex on a large scale. Forex brokers are not traders themselves but do occasionally have their own staff trading on the broker’s account.
A forex brokerage allows retail traders to interact with the markets and forex brokers are compensated by the bid-ask spread. The bid-ask spread is the difference a trader pays between the market price and the price offered to them by the forex broker. This is in contrast to equity brokers who charge a commission fee on every trade.
Initially forex brokers were not regulated by their respective governments but this has changed over the years as more and more retail investors became involved. However stock traders enjoy more protection against rogue brokers than do currency traders: in the US retail stock traders are often protected to up to $100,000 should a broker go belly up but there is no such luxury if you practice currency trading.
Clearly a budding day trader of forex should be careful when they choose which forex broker to use. You are mainly reliant on the reputation of the broker so ask around before you choose your forex broker.