In the previous lesson , we identified two major kinds of Forex brokers: Dealing Desk, and Non-Dealing Desk, also abbreviated as NDD. In the latter category there are more variations like ECN broker, Straight Through Processing broker (STP) and ECN broker. In this course we will discuss the two kinds of Forex brokers.
What is an STP Broker?
An STP Broker, or Straight Through Processing Broker, is a type of Forex broker that allows traders to trade without intervention. This means that the orders are sent straight through to the liquidity providers, who then match buyers and sellers. Because there is no middleman, STP brokers typically have lower spreads and better customer service. In this blog post, we will discuss what STP brokers are and how they work!
STP brokers offer their clients a number of benefits, the most notable being lower spreads. By not having to worry about intervention, STP brokers can offer their clients more competitive prices. In addition, STP brokers typically have better customer service because they are not bogged down by the need to manage a dealing desk.
So, how does an STP broker work? When you place a trade with an STP broker, your order is sent directly to the liquidity providers. The liquidity providers are the banks and other financial institutions that provide the capital for trades. These institutions match buyers and sellers and execute the trades. Your broker simply facilitates the process by sending your order to the liquidity providers.
Advantages of an STP Broker
– The quoted prices are likely to fluctuate making them suitable to use for scalping strategies.
– Live trading is possible directly from the interbank market with the highest bid and asking quotes
– Tightest spreads may be zero
Disadvantages of an STP broker
– The trading platform is complicated and is not intended specifically for retail traders.
What is an ECN Broker?
ECN is the abbreviation for Electronic Communications Network. Simply put, ECN Forex brokers allow their customers’ orders to communicate with orders from other participants within the network, thereby they trade against each other. Banks, participants, retailers, hedge funds, retail traders, and other brokers trade with each one by offering their highest prices for both bid and ask.
ECN brokers are ideal for traders who want to get the best possible price for their trade. This is because ECN brokers have access to a large network of banks and other financial institutions. This allows them to offer their clients the best possible price for their trade.
ECN brokers also offer a higher level of protection for their clients. By using an ECN broker, traders can be sure that their trades will not be manipulated by the broker.
If you are looking for a forex broker that can offer you the best possible price for your trade, then an ECN broker is the best choice for you.
Advantages of an ECN Broker
– Directly connect to the interbank market for trades in real-time.
– Live trade and direct with the highest bid and asking prices from an interbank marketplace
– The tightest spreads that can be even
Disadvantages of an ECN Broker
– ECN trading platform can be a bit shady because it was not created specifically for retail traders.
– Limited trading signals for trading and trading tools, such as news feeds
– ECN brokers typically charge a fee for every trade
The risk involved with forex trading online shouldn’t be overlooked. There is a chance of losing a significant amount of money if you don’t know what you’re doing. It is crucial to gain a knowledge of the market prior to you even begin investing with money. Keep reading our lessons.