Forex brokers are the point of interaction between a trader and the market. They offer traders all of the necessary trading resources, including platforms, tools, accounts, etc. Trading is becoming more and more popular as a result of brokers’ ability to enable access to the financial markets for an increasing number of consumers. Hence, choosing a reliable broker is essential. Picking the right broker for your trading needs might be difficult given the abundance of brokers accessible. Selecting your broker should be done thoughtfully and methodically.
There are mostly two types of forex brokers– Dealing Desk and No Dealing Desk. Both of these are further classified into different brokers, which are as follows:
- Market Makers – A form of Dealing Desk brokers
- Electronic Communication Network (ECN) and Straight-Through Processing (STP) brokers – A form of No Dealing Desk brokers
Let Us Further See The Differences Between The Brokers In Depth.
Dealing Desk (DD) Forex Brokers – Dealing desk brokers typically offer set spreads. Which means that the spreads are not variable. For novice and experienced traders who do not want to directly trade with the liquidity providers, using a dealing desk is a sensible decision.
- Market Makers– Market makers give clients access to a two-sided market that comes from a qualified forex trader who is a part of the broker’s internal dealing desk. If the price is agreed upon, the broker will ultimately take the opposing side of any given transaction from their customer by buying on their bid side or selling on their offer side of the stipulated price. This broker’s objective is to execute enough deals on both sides of the market and take a portion of the spread to avoid shifting accumulated risk to another knowledgeable counterparty.
No Dealing Desk (NDD) Forex Broker– NDD brokers allow their clients direct access to the foreign exchange market without utilising a trading desk. While trading with an NDD broker, you will pay either a spread, a commission, or both for their services. Since NDD brokers work with banks and other important market participants, they can provide forex traders with a more competitive bid and ask prices.
- Electronic Communication Network Broker– ECN broker provides a digital trading platform for retail traders, professional market-makers working for banks, and other participants in the forex market. The benefit of an ECN broker is that the trader who posts the price can continue to be anonymous; they don’t reveal their identity. For traders who don’t want to publicise their participation, this may be a useful feature.
- Straight Through Processing Broker– STP brokers have the ability to send trading orders directly to liquidity providers. Also, they don’t obstruct transactions regarding the fulfilment of orders. Most STP forex brokers work with a variety of liquidity providers. STP brokers can increase the likelihood that their traders will profit on the forex market by collaborating with different liquidity providers.
If forex traders want to succeed in the market, they must choose a broker who can offer the services they require without acting dishonestly. This will increase the safety of your money and allow you to trade without any problems. Since every forex trader has unique aims and trading objectives, it is usually advisable to do your own research before choosing a broker.