As you have undergone the basic ideas of Forex, you are going to learn some more advanced systems of Forex here. We went through the pretty basic things in the previous article. Here, we will talk about some more advanced ideas of Forex trading.
Types of Broker
The Forex market is larger than the stock market. So, it is very common to have different kinds of brokers in Forex. Choosing the right broker can be a daunting task. However, if you learn about the different kinds of broker and know their working principle things will become bit easier.
Forex brokers are divided into two categories.
- No dealing Desk or NDD
- Dealing Desk
No dealing desk or NDD brokersare divided into two categories.
- Straight Through Processing (STP)
- Electronic Communication Network + Straight Through Processing (ECN+STP)
Dealing Desk Broker
This type of broker is the best type in the Forex market. They are also called the market makers. They fill up both the sell and buy orders of their customers.Their clients can trade in the market, that is created by the market makers and they often take the other side of the trade of a client. When you are trading in the market makers’ market, you will not see the interest of the interbank, but they are largely the same as those offered by your Dealing Desk broker.
Desk Dealing brokers have many risk management policies. So, for your trade, if you want to minimize your risk, trade in the market with your DD brokers.
No dealing Desk Broker
This is the opposite of the Dealing Desk broker. The DD takes your order and often takes the other side of your Forex trading order. But, non-dealing desk brokers will not pass your order. They will simply establish a linkage for your trades with other parties. They will not take the other part of your trade.
Being a new trader, you should choose a broker very wisely. If you fail to choose a reliable broker, you are going to have a very tough time in the trading business. Learn more about the different conditions offered by the high-end brokers Saxo by visiting the link https://www.home.saxo/en-sg/products/forex. Once you go through their offered service, the broker selection process will be much easier. You will learn how to effectively compare brokers in the retail trading industry.
NDD brokers are divided into two categories. They are-
1. STP Straight through Processing: This type of broker has an STP system. This system establishes a direct connection with the orders of the clients with many liquidity providers. These liquidity providers have access to the interbank, which means, they can quote their bid and currency price.
Suppose you place an order through your NDD broker who has an STP system. Your broker will establish a connection with the liquidity providers who have access to the interbank. The best bid or ask price will be automatically selected by this STP system and you can know your best bid or ask price to make a profit.
2. Electronic Communication Network + Straight through Processing: This type of broker enables the client’s order to communicate with the other orders in the ECN. In this market, the broker does not show you the best price of the bid or ask. You compete with the other traders in the market by giving your bid and ask price. You can also see the real condition of the market in ECN broker trading.
These are the types of brokers in the Forex. As you start to experience and develop your understanding of Forex and progress from a beginner level to an advanced level, you can place your orders according to your best understanding and make a profit. It will be tough to understand the different classes of broker at the initial stage, but once you trade the market for few months, you will no longer have a problem with classifying brokers.