A forex broker is a company that offers the trade of currency, commodities, indices, stocks, ETFs, and cryptocurrency exchange to individuals or companies by accessing a trading platform. A trader uses a broker to access market 24/5 hours in a week.
A forex broker needs customers to deposit money into their account. Broker supports clients through leverage to hold a big position with a small deposit. It charges a commission for each execution in pips.
Types of Forex Brokers
There are two types of forex brokers.
- DD (Dealing Desk) Broker
- NDD (Non Dealing Desk) Broker
What is Dealing Desk Broker?
Dealing desk broker is known as “market maker”. It makes money through spreads and provides liquidity to the clients. These brokers often show their own personal sell and buy quotes. Market maker broker holds the client order and doesn’t forward directly to the liquidity provider. They are legally obliged by way of countrywide and worldwide regulatory authorities to reveal the exceptional feasible rate to their clients. Their offering prices differ for the real market price. Latterly they take the opposite side of the client trade. DD brokers have different risk management policy. They want to engage loser clients with different bonuses.
I will sagest that don’t work/trade in Market Maker or Desk Dealing Broker.
What is NDD (Non-Dealing Desk) Broker?
Non-dealing desk broker doesn’t hold your trade and send it directly to the liquidity provider. It doesn’t take the opposite side of the client’s trade. It works just like a bridge between traders and liquidity providers (banks etc). Always work/trade in Non-Dealing Desk Broker.
It is further divided into three types.
- FX STP Broker:
STP stands for Straight Through Processing. ECN broker routes the orders of their clients directly to their liquidity providers. Such type of brokers makes money by spread and commission. They are in favor of clients and want to engage profitable traders.
- FX ECN Brokers:
ECN means Electronic Communication Network that gives direct access to the other participants in the exchange market and consolidates price quotations from several market participants. Participants may be banks, currency traders, etc.
- FX STP+ECN Broker:
Some brokers have hybrid STP and ECN features.