Trading in Forex is not a solo journey. People who want to trade in the Forex industry must know that they will need to use an intermediary in order to take part in the exchange business. This intermediary is known as a broker. In the Forex market, several types of brokers are available. To choose one among them, a trader needs to know who they are and how their given services’ scope.

Types of Forex Brokers

Trading is not just entering the market; it’s about learning the right practices and put those into activities. Brokers are inseparable and important part of Forex trading. Putting some extra time in searching the right mediator will always benefit a trader. Let’s get introduced to the different kinds of traders working in the Forex market.

All these intermediates can be classified into two main types: one is the dealing desk brokers, and the other one is the no-dealing desks brokers. The former one between these two is also known as market makers. No-dealing desks dealers have been classified into two more types: the STP (Straight-Through-Processing) & the ECN+STP (Electronic-Communication-Network converged with Straight-Through-Processing).

1.Dealing Desk or Market Makers

By offering liquidity to the market traders, dealers who work through Dealing Desk earn money.

Spreads are another important source of their income. They are also termed as market makers, so don’t confuse when you ever hear this term with any other thing. Visit the site of Saxo and see what they offer to the UK clients. Soon you will get generic idea about the high end broker. Always choose a well regulated broker for your options trading career.

If anyone is wondering over the term “market makers”, this is the reason. Dealing with desk contractors actually make markets for clients. They help them by maintaining the opposite side of those clients’ businesses.

People may question the whole process and accuse it of providing less independence to retail traders and intervening their right to make their own decisions. They may be misinterpreting the whole system. What those market makers actually do is offer both a buy-and-sell quote. They are helping their clients filling all the orders while they themselves remain indifferent to the decisions made by the clients.

There is another fact about Dealing-Desk brokers that all the traders may get confused about. That is the retail trader’s lack of ability to observe the actual interbank rates while trading through market makers. However, this is a false fact too. All the mediators are also in competition with each other, they try to offer the least possible rate to the customers.

2.No-Dealing-Desk Brokers (NDD)

This type of broker doesn’t deal through dealing-desks. It means they don’t really take the counterpart of their customers’ business. They just simply connect two parts together. They play as the bridge builders and make it possible to connect two nearly impassable areas with one another.

Unlike the DDs, NDDs can charge a small amount of commission in exchange for a provided trading facility. However, an exception also exists. They may also cut their wage from the spreads.

NDDs have two different variations, though.

• STP Broker

Though many can claim themselves as authentic ECN dealers, they may only use an STP system. Those who work through the STP system only direct their customers’ orders to the liquidity providers. These liquidity providers are the group who have access to the interbank.

• ECN Broker

Now an ECN broker, unlikely to the STP ones, allows the orders of their service takers to interact with their participant’s orders.

These participants could be different banks, hedge funds, retail traders and perhaps other dealers. Fundamentally, these participants trade by offering people the most favorable bid-and-ask prices.

With ECN, a trader can see information like other market participants buy-and-sell orders. The nature of ECN means slapping on a fixed markup is difficult. Therefore, ECN brokers compensate themselves with a small amount of commission.