The foreign exchange (FX) market has many similarities to the stock market. However, there are some important differences. If you choose to trade forex, access to the forex market will be easier than ever with a wide range of online securities platforms that offer everything from spot trading to futures and CFDs. The broker plays the main role in the trading arena. Forex brokers are financial services companies that provide traders with access to a platform for buying and selling foreign currencies also known as online forex trading. Forex brokers are also sometimes referred to as retail forex brokers or forex trading brokers.
Role of Forex Broker & how it works
Forex brokers are the units that connect forex traders to the forex market and provide an opportunity to open a forex trading account. A forex trading account is like a bank account where you can buy and hold currency. Currencies are intentionally purchased in pairs. When buying EUR / USD, keep in mind that the US dollar will fall per euro over time. In order for you to make a profit, the euro needs to be worth more money in dollars.
Types of Forex Brokers
Forex traders alike, beginners and experts, need to choose their broker carefully so that they can work with a broker they can trust. Most of these brokers usually have the same access and the same quality in the forex market, but the procedures and policies they use are still very different. Each broker also represents a different level in the industry. There are people who have a high level of knowledge in this field and can go directly to the market. Some brokers are very remote and have little to do with the market. Learning about the different types of brokers is key to maximizing your chances of choosing someone who will help you become a successful Forex trader. Here are just some of the Forex Brokers and their unique functions and roles:
- Dealing Desk
- No Dealing Desk
- ECN Broker
- STP Broker
a) Dealing Desk – This broker belongs to the market maker. Trading center brokers or market makers usually offer fixed spreads. Most of them also work by selecting quotes that are below or above the market price at any given time. Trading with a trading center is a smart move for beginners and experienced traders who do not want to trade directly with liquidity providers. Dealer Brokers usually get their payouts through spreads.
b) No Dealing Desk – Working with an NDD broker allows you to use low, non-fixed spreads. Since spreads are not fixed, their values tend to rise significantly when volatility increases due to important economic disclosures. To make money, NDD brokers can increase spreads or charge a fee for all Forex trades.
c) ECN Broker – ECN (Electric Communication Network) broker typically offer and display actual order book data containing orders processed and prices offered by various banks in the interbank market. Most ECN brokers provide information to all participants in the forex market as a means of increasing market transparency. They work with traders and charge a fee for each volume traded to generate income.
d) STP Broker – STP (Straight through Processing) Brokers can send trading orders directly to liquidity providers. It also does not interfere with order execution transactions. Most STP brokers work with multiple liquidity providers. STP brokers that work with many liquidity providers can also give traders a better chance to succeed in the Forex market.
Choosing the best ECN/STP Broker
Take your time when looking for a reliable forex broker to make sure your money and trades will be handled appropriately. The safety of your funds and private information is more important than any other consideration when you open a forex account because brokers can get hacked or go bankrupt. Even worse, a forex broker can recover more than your account balance through legal action if it doesn’t offer negative balance protection, which promises you won’t be asked for more money than your account balance if a position crashes. Familiarize yourself with the deposit and withdrawal procedures before giving money to the broker. Some require long waiting times before they can be transacted when they fund their account by check or wire transfer, while others charge huge fees when withdrawing funds or closing their account. So, working with best or to find the reliable broker is bit a challenging task now a day. But we can suggest you the most popular & best ECN/STP broker in the financial market that is Xtreamforex which is giving its services since 2015. There are various benefits while working with this broker which aids you in the best online forex trading experience. They offer the following benefits which makes them the most trusted & the best ECN broker to work with.
- Lower bid and ask spreads
- Ultra fast order execution
- Deep pool liquidity
- 24/5 Excellent Customer Support
- Segregated Client Accounts
- Negative Balance Protection facility
- Providing Free Education Support & more
Brokers have a lot to offer to traders, whether you are new to the trading world or more advanced. Choosing the right one will help you learn to grow, avoid dangerous situations, and develop strategies in the process. Before committing, check where your type of broker and be aware of your leverage. The potential for big wins also has the potential for great losses. There are many great brokers out there to find out the best ECN/STP that’s one right for you to start online forex trading.