Different Types of Forex Brokers

Opening a forex trading account is not just enough, you will need a forex broker who will manage your forex activities. Finding the best broker is not an easy task considering there are many brokers available in the market. To find the best trading broker you will need to adequate time for research. The decision of choosing the right broker should not be taken lightly. This is because the kind of broker you choose can influence the nature of the service you get, transaction charges and also the spreads.

The Different Types of Forex Trading Brokers

You can choose the kind of forex broker to work with based on their Forex quotes. There are three main types of forex brokers based on the quotations which include: market-making no-dealing desk as well as the electronic communication network brokers. The most common type of these brokers include:

Market Marker
No Dealing desk
Electronic Communication Network

The manner in which these brokers handle the transactions and execute the orders is completely different from one another. In this article, we are going to at the various types of forex brokers, their transaction qualities as well as distinction.

  • No Dealing Desk Forex Brokers

This type of forex broker does not have a dealing desk and thus the name No Dealing Desk. However, the NDD provides the top composite quotes sourced from the various forex quotes providers which ensure the forex broker has a high volume of activity in the forex market.

The providers will display their top exchanges with the broker. The broker will thereafter perform transactions, monitor them and fill orders on behalf of the client. In order to perform transactions on behalf of the client, the NDD broker will impose a commission or stretch the bid so as to realize some profit on every transaction performed, they can even do the both.

  • Market Makers

A forex market maker provides their clients with a two-way market that is obtained from a forex trader expert working without assistance from outside the organization. If the rate is dealt on, the broker will shift to the opposite side if there is a transaction given by the client by either purchasing on the side that is favorable to them.

The main aim of the market maker is to captivate a percentage of the expanse and to do adequate volume on either side of the market to ensure there is no refraining from the aggregated risk with another specialist counterparty.

When the trade effected is extremely large, the market maker may opt to counterbalance the trade with immediate effect, particularly when they feel the market might shift against it. Additionally, they can record on the trade books based on the market scope and the amount being transacted.

  • Electronic Communication Network Forex Brokers

ECN is a short form of Electronic Communication Network Forex broker. Just like the No Dealing Desk broker, ECN lacks its own dealing desk. This type of broker features an electronic platform for trading purposes where the trained market makers in financial institutions such as banks, traders and other people who take part in Forex market can insert bids as well as offers via the system.
A trader posting the prices which are not outstanding will be notified by some of the ECNs.

  • Retail Forex brokers

These are also another different type of forex brokers. They are more common with the new traders. The registration of accounts can be done online and for one to start trading he or she should deposit a minimum of $100. The functionalities available are amazing and the trading process is straightforward. Before deciding on the broker to choose to ensure first find out what other brokers are dealing with. Some of the factors you need to put into consideration include instant buy and sell into the market and also the live customer service. There are brokers who experience delays when it comes to accessing the market which can be quite irritating.

The discussed above are the different types of forex brokers and each one of them has a different way of handling transactions and executing the trade. Shopping around is important because it helps a trader to find out what different brokers deal with. This will help in making the right decision on the broker to choose.

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