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adamsmiths

Kinds Of Foreign Exchange Brokers

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Forex brokers serve as an intermediary between two parties involved in a forex market transaction, buyer and seller. Forex brokers help the traders conduct trading activities in decentralised forex market connecting them to the market. There are different types of foreign exchange brokers out there, who have been employed by forex traders to carry out manual or automated forex trading. This information has been shared by easy market.


  • Market Maker Brokers: Dealing Desk brokers are the one who act as counter-parties to clients in the foreign exchange trade. They are in possession of a dealing desk, and normally act as counter-party for their clients. This means they must buy when the client sells or vice versa, therefore, taking a trading position which is completely opposite in position. There exists a conflict of interest between the broker and his client trader. Market makers set the exchange rates that may differ from another market maker or ECN. Although the prices are set as per their own interest, spreads are kept fair due to stiff competition among numerous market makers. There can be times when market makers trade against the client. They can hold an order by passing it on to someone else. In case, they don’t find it there, then they can pass the order to a liquidity provider. Market makers normally have quotes that are marginally different from the liquidity providers in the inter-bank market. They have fixed rates and let out negative slippages more often than positive slippages.

  • No Dealing Desk Brokers: “No-Dealing-Desk” brokers are the ones which do not work as ‘counter-parties’ to their clients. These are the ones that are ECN, STP or ECN+STP. And their characteristic feature is a lack of the ‘dealing desk’ which the market makers possess. Their clients’ orders are passed on directly to liquidity providers for execution without any sort of intervention from a dealer. The No-Dealing-Desk broker offers spreads that are variable and low; and the execution speed is also extremely fast. These kinds of platforms earn money from a fixed commission.

  • Electronic Communication Network: ECN brokers are also sometimes referred to as STP or ‘straight-through-processing’ mode of execution. They, like market makers pass on the orders of the client to the inter-bank market for the purpose of execution. However, they would not allow their clients to be the counterparty to a transaction. A majority of ECN brokers normally possess a trade module, whereby all the orders from banks and financial institutions are displayed on the chart, and this helps the traders to compete against one another. Therefore, they have perfect transparency when it comes to price quotes. The spreads are normally very variable, and are usually quite low. ECN brokers make money from the spread and by charging a fixed percentage of commission on trades. Also, for most of the time, they require a substantial initial deposit in order to open an ECN account with a broker.

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I prefer those brokers that provides you with the technology and quality services, don't trade against you like market makers and hybrid model brokers. For the said reason, i am now trading with more than one broker and all of them are ECN or no-dealing-desk brokers.

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we can choose regulated trading broker which guarantee their clients funds. because only regulated trading broker make sure security of funds at any deposits with a wide range of trading technologies.

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well i simply clasify forex broker into 3 categories, 

first the bad ones, the ones that are there to hunt for your money and eat it up
second the good ones, that gives you a good chance with decent services and fair effort to earn like the rest of the world
third the ones inbetween the ones that trying to make it big yet are simply starting cant say which is good which is bad but worth avoiding as well

always go for good brokers with good reputations, I personally trade hotforex and thats my preference anyway.. best of luck 

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I think we should trade with reputed brokers and should withdraw profits regularly by keeping the only capital behind in order to stay safe while trading with any broker.

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