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What are types of Forex broker?

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  • What are types of Forex broker?

    People really believe that it is easy to invest and earn money in currency trading in some parts of the world, such as the United States, Asia, and the United Kingdom.

    The foreign exchange market is very competitive, and if you try to search for all the latest foreign exchange markets, it can give you a headache.

    So, if you want to trade on trading platforms then at first you'll have to choose a good and regulated broker.

    Therefore, first of all, what is a Forex broker?

    A foreign exchange market is a company that provides traders with an entry into a trading platform that allows them to buy and sell currencies. Traders use these brokers to access the Forex market 24 hours a day.

    A foreign exchange company (often called a retail broker) manages a very small part of the total volume of the foreign exchange market. Foreign currency brokers are mainly paid via the "bid-ask spread" of a currency pair.

    Your first priority is behavioral research to determine if a foreign exchange trading company has an outstanding reputation and is able to meet your requirements.

    It's enormous.

    The vast majority of major currency brokers will allow potential customers to test their services with a demo account or a real account, in order to fully understand the reality of the system.
    It would be wise for you to test as many FX platforms as possible before choosing which company to use.

    Types of Forex Brokers

    We can discuss several types of regulated foreign currency brokers according to different criteria. So let's move on to something else.

    The latest FX brokers can usually be divided into groups for:

    Here are the types ...
    • Brokers with licenses (deemed)
    • Brokers without a license (or without a reputation)

    In general, there are dealing with desks (DD) and NDD (No Dealing Desk):

    DD brokers

    We normally consider DD brokers as market makers. The infamous term "market makers" is used because these foreign exchange companies usually take the opposite of traders. They make money with spreads and money.

    They also try to find a similar order, long or short, at their other customers, before taking a counterparty exchange or handing it over to a liquidity provider. They are known to offer artificial quotes and orders are executed on an optional basis.

    No Dealing Desk

    Unlike DD, NDD uses STP and ECN technologies without a trading desk and routes transaction orders directly to liquidity providers. This allows customers to access real markets with better and faster fillings.

    It is a bridge between customers and payment service providers, and there are no requotes when an order has to be executed. We distinguish two types of NDDs: STP and ECN.

    STP Brokers

    Direct Processing Technology (STP) does not require a desktop. All orders are routed to fx's cash suppliers and prices are executed at the bid / ask rate provided by the liquidity providers.

    In this case, the liquidity providers are hedge funds, large banks, and investors who act as counterparties for each transaction.

    As a general rule, the STP trading company has an internal cash pool represented by different liquidity providers, which compete for the best bid / ask spreads for STP broker orders.

    More generally, STP means that brokerage acts as a silent connection established between the market and the trader, rather than a reprocessing processing center. Please note that SGT Markets exclusively uses the STP model.
    The other advantage of an STP broker is the "DMA". DMA means direct access to the market.

    The DMA is when a foreign exchange trading company places orders from its clients directly into its cash pool. Thus, orders are processed at the best possible price, with only a small margin distributed by the FX broker.

    This actually offers the best possible distribution for its customers. Running the STP is simply not remunerated and, because of its speed, is ideal for traders who like scalping and exchanging news.

    ECN Brokers

    It is true that a few years ago, the ECN MT4 seemed excessive. In fact, the initial reaction to this concept was that it seemed impossible. If a Forex trader wanted to use the standard platform, he was supposed to trade with a single broker.

    Nevertheless, the demands of the retail forex trader have come to be heard and MT4 ECN has been developed in response.

    There are many similarities between STP and ECN brokers, but the main difference is routing. As mentioned above, the STP may choose to deal with different liquidity providers outside its cash pool, while ECN acts as a kind of hub.

    So, this was some types of forex broker and if you find it helpful then please let me know.
    Top 10 Tending Forex Brokers Reviews 2019

  • #2
    You really should choose some reliable thing in your country, regulated one, means you willl be able to prosecute them in case you may not able to withdraw money, just read all the horrible stories around the internet. Please take a moment to read just a few.


    • #3
      That is a very detailed explanation! My recommendation is to always deal with well-regulated brokers.