When choosing a broker, traders want to know the different types of brokers. We will help you to discover various kinds of brokers.
There are many types of brokers. Some brokers are legitimate, and other brokers work illegally. The trader should carefully choose the broker, whether the trader is a beginner or an expert. They should work with reliable brokers. The broker, whether legal or illegal, can access the market with the same quality, but policies and procedures are usually different. So it is essential to learn about the different types of brokers.
What Is A Broker In Forex?
The broker is a type of brokerage firm considered a middle man between the forex market and the trader. The broker serves as a platform where traders can exchange currencies and trade. In return, the broker charges a commission as a spread to exchange money.
It isn’t easy to be a profitable trader in Forex, but if the broker is reliable, the trader can gain consistent profits.
Types of brokers
The Dealing Desk (DD)
The dealing desk is the first type of broker that is a market maker. These brokers charge a fixed spread on trades. The trader can trade by electing a quote or trade at real-time prices. Working with a dealing desk broker is good, even if the trader is a beginner or an expert. This is mainly for those traders who don’t want to work with liquid providers. These brokers receive fees in the form of spreads.
NDD stands for No Dealing Desk.
A no-dealing-desk broker is the second type of forex broker that allows the trader to access the market directly. If the no-dealing-desk broker is reliable, they will not ask to quote the price. The trader will trade by following an economic announcement, and they will not face any restrictions while opening a position. These brokers usually charge a low spread, but the space is not fixed. If the spread is not set, there is a high probability of increasing the prices with an economic announcement. When traders need to transact money, they will charge an extra fee or commission.
ECN stands for Electric Communication Network.
The electric communication network is a third type of broker offering order book details. This order book contains information about various orders and price fluctuations across multiple forex banks. These brokers provide all the information to the traders, improving their transparency.
When a trader earns a profit, they will charge a commission. Traders can process interbank transactions.
Straight Through Processing (STP)
STP is the last type of broker that passes their orders to the liquid providers. These brokers have no concern with order execution or transactions. These brokers work with different liquid providers. As these brokers work with various liquid providers, they have more chances to succeed in the market.
When a trader selects an STP broker, he must do so with caution because many STP brokers engage in fraudulent activities. Tradenation also help to find best forex brokers.
What type of forex broker should I choose?
Brokers are frequently perplexed when it comes to selecting an ECN, STP, or DD broker. So we will help you choose a broker. If you are a beginner, you should select a dealing desk, which is a market-maker broker, because the beginner doesn’t want to take much risk and can’t manage high risks. So they should trade in nano lots. The dealing desk brokers work with nano lots, which reduces the risk, and the trader can fight for each pip.
If you are a day trader, then you should choose a day trader who helps the trader to use every pip in the market. The broker will also give more spread. But they will also charge some commission for trading. But they will also offer a tight spread to the trader.
Professional traders can work with STP or ECP.
So these are some of the types of Forex brokers. The trader should not be deceived while choosing the broker because he knows all kinds of brokers, but safety comes first. After all, the trader invests capital and wants to earn a profit.
Therefore, the trader should choose the best broker to avoid fraudulent activity. In this way, the trader can focus on trading.