In recent years, the number of forex brokers has significantly increased. Therefore, the traders find it pretty challenging to find the ideal forex broker that best fits their trading needs. Besides, it is also tricky to select the best from several options available. Typically, the traders choose brokers by reading reviews about them, by seeing an advertisement, or sometimes on the recommendation of a near or dear one. Other than all this, the traders must have complete knowledge about the broker before making a move in the forex market. Read More
What are forex brokers?
Forex brokers are the individuals or institutions that conduct trading activities on behalf of their clients. In return for their services, they charge fees which can be variable or fixed depending upon the type of broker selected for this you can check freshforex review. The brokers are an indispensable part of the forex market, and the traders cannot enter the foreign market without them.
Types of forex brokers
Generally, the forex market comprises STP and ECN brokers. They are the significant brokers prevailing in the foreign exchange market. Let us understand more about them:
STP forex brokers
STP stands for Straight Through Processing. These brokers generally send the trader’s orders directly to the liquidity providers. Therefore, like this, the order is processed and fulfilled. However, these are the dealing desk brokers and account for different brokerage features. Following are some of the significant features a trader receives via STP forex brokers:
- Trade execution speed: The trade execution speed is optimum as these brokers use different trading softwares for completing the trade orders. However, manual intervention is more as many trades are made via dealing desks. Thus, when the market is volatile, the traders may notice a delay in overall trading speed.
- Market and quotes: The STP brokers typically trade directly with the market participants; hence, they offer accurate market quotes. Furthermore, some forex brokers also provide artificial quotes to improve their margins.
- Conflicts: The STP brokers generally trade against their clients; therefore, they profit from the trader’s losses. Hence, some brokers work in a way that enhances their chances of profitability.
ECN forex brokers
ECN stands for Electronic Communication Network and is regarded as the future of the foreign exchange market. These brokers are the platform the small market traders or participants can link directly with the large liquidity providers. These are not the middleman but the platforms; hence, they operate as non-dealing desks. Following are some of the features the traders get via ECN forex brokers:
- Reduced bid and ask spreads: The ECN forex brokers match the orders instantly; therefore, they experience tighter spreads. It means that the traders can quickly enter and exit the market at more affordable rates than they get by dealing with other brokers.
- Flexibility: The overall flexibility is extensively high when trading with ECN forex brokers. These brokers ideally allow the traders to trade at odd hours of the day. Hence, the traders can trade as per their comfort.
- Trade execution speed: The spreads offered by the ECN forex brokers are relatively tight; thus, the trade execution speed is pretty high. Hence, they execute the trades at much speed as compared to the other forex brokers. Read the voyager review written by traders.
Which one to select?
There are considerable differences between the STP and ECN forex brokers. However, it is solely the trader’s decision. The ECN forex brokers are pretty expensive than the STP brokers. While on the other hand, the trade execution speed offered by the STP forex brokers is relatively slower than the ECN forex brokers. Thus, the traders can decide based on the trading needs.
The Bottom Line
Therefore, in a nutshell, it is fitting to mention that choosing a forex broker is an essential concept for traders. With the right trader read fxgiants review, the overall profitability enhances, and the traders can also expand their investment portfolio.