Type of Forex Brokers
The foreign exchange is the largest financial market in the world and the most liquid. As it is not a centralized market, there is no single regulatory agency, but several regulatory agencies divided by the world’s financial centers. Check that the broker is regulated in one of the following major financial centers: United Kingdom, USA, Japan, Australia, Switzerland. It is worth remembering that 90% of traders lose money, traders are emotional and much of the fault lies with the broker, which is unfair.
With the growing popularity of foreign exchange, many unregulated and dishonest brokers, scams and bucket shops have emerged. Therefore, select only REGULATED Brokers. Don’t even waste time with relatively unregulated brokers. Let’s look at the main types of Forex brokers:
They are not regulated, they have high leverage and many benefits. They offer bonuses like: “Deposit $ 100 and win another $ 100”. They provide real-time quotes, but orders are not sent to the market and traders operate according to market fluctuations. Some people even pay, but as soon as traders start to earn continuously, they start chasing downtime losses and interrupting their operations. Brokers usually simulate the market and trade with us. Avoid this type of broker. See the SCAM list on thewebsite FOREX PEACE ARMY.
MARKET MAKERS (MM) BROKER:
This is where most brokers / brokers fit in. Market makers profit from spreads. All negotiations are conducted through the trading desk. The market price is affected to keep the spread (the difference between the selling price and the purchase price) to a minimum. The reason is that these brokers do not charge directly from the broker, but rather the amount referring to the spread (still brokerage fees). The biggest problem here is that if the market becomes too volatile, it will increase the spread to an unacceptable level for market transactions. As it is not an ECN, the client does not negotiate directly with the market, but through the broker’s “agent”, therefore, he must have the agility to forward orders and be responsible for the immediate execution of orders. news), it may not be able to function very quickly and, eventually, it will have to take operational risks to guarantee customer orders. As many people are not willing to take such risks, they artificially increase the spread, thereby minimizing the client’s commercial interest. This is a normal phenomenon, but we must remember that spread control is variable and will affect operating profit, so we must be cautious. Some MM brokers are NDD (No Dealer Platform), which can execute orders more quickly, but are not ECNs, which are the main products in the foreign exchange market.
ECN(Electronic Communication Network) BROKER:
So far, this is the best choice! Your order will be sent directly to the market without the broker’s intervention. An ECN broker makes a profit from the commission charged. The spread is the market spread and sometimes the spread is zero.
The best option is still a broker connected to ECN. As we have seen, in ordinary brokers, trading has to go through a trading desk before being sent to the market. Through the ECN connection, the order will be sent directly to the market.
If you have a scalper business profile (short operations with quick objectives), using an ECN broker is even more important because order execution is instantaneous. At ordinary brokerages, this execution speed is slow and, generally, in very turbulent market conditions, especially in the news, sometimes orders are not executed, but new quotes are necessary.
In other words, for traders looking for quick, short-term profits, a few seconds are essential for defining profits and losses. For those traders who don’t target money changers, their goal is to make bigger profits at many points, and speed of execution is not as important as money changers. In this case, MM or NDD brokers are sufficient, as long as they do not cover denominations.