Knowing Which Type of Forex Broker is Tailor-Made For You as a Trader
In trading, you should know that there is more than one type of forex broker. We have a dealing desk and a no dealing desk broker. Also, no dealing desk brokers are further subdivided into two more categories: STP or Straight Through Processing No Dealing Desk brokers and STP + ECN or Straight Through Processing + Electronic Communications Network No Dealing Desk brokers. Among these forex brokers, who should you choose? It is all up to you as a trader. A Dealing Desk broker is not better than a No Dealing Desk broker and vice versa.
Which type of forex broker is the best for you?
Your forex broker depends on what type of trader you are. And when we say this, it depends if you are a trader who prefers tighter spreads and pays commission per trade, or you would rather have wider spreads with no commissions.
If you are either a day trader or a scalper, you might prefer tighter spreads. It may be more convenient to take smaller profits since the market only needs minimal ground to cover and get over transaction costs. On the other hand, if you are a trader who prefers long-term swings or positions, then a wider spread might not be the perfect choice for you.
More on the different types of brokers
If you have a hard time knowing which type of forex broker is the best for you, we will differentiate them more below:
Dealing Desk brokers (DD Brokers)
We can also call them the market makers because they will literally make the market for their clients.
- Spread. They have fixed spreads.
- Side. They take the other client’s side.
- Quoting. They have artificial quotes.
- Order filling. The broker fills the order based on discretion.
Straight through processing, No dealing desks brokers (STP NDD brokers)
STP brokers are under the classification of no dealing desk brokers.
- Spread. They have variable spreads.
- Side. They act as bridges between the two clients while providing them liquidity.
- Quoting. Liquidity providers provide the prices.
- Order filling. The orders get automatically executed, and there are no re-quotes.
Straight through processing + Electronic communications network, No dealing desks brokers (STP + ECN NDD brokers)
STP + ECN brokers are also under the classification of no dealing desk brokers.
- Spread. They may charge commission or have variable spreads.
- Side. They act as bridges between the clients, liquidity providers, and other participants.
- Quoting. The liquidity providers and other ECN participants dictate the price.
- Order filling. The orders get automatically executed, and there are no re-quotes.
- Additional. It enables access to the depth of market and other liquidity information.
The common negative impression that forex brokers get
Indeed, everyone wants to earn money, be it the trader, the forex broker, and even the ones who created the idea of trading. Since we are all on the same page, at least in this one, know that if a forex trader loses one client, that also means bad business for them, right?
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