What is ECN brokers?
ECN Brokers automatically match requested orders to sell and buy at the best available price from several market participants, while at some time EUR USD spread maybe even 0 pip. In simple words, the Brokers ECN Forex broker bridging technology furnishes a sophisticated FIX Protocol that brings the speed of light performance and high internal liquidity.
Apart from the competitive trading costs and due to its functions ECN technology also results in extended trading time too, along with high efficiency for automated trading and a variety of strategies suitable for both retail or institutional traders.
Besides, ECN execution cannot cause any misunderstanding between the trader and the broker as its interbank connectivity brings transparent trading conditions.
The main difference is on the execution method between Standard and ECN accounts, as well as the fee policy or the trading costs you would have. Unlike Forex market maker brokers offering Standard Account that typically charge fixed spread for Forex trading added above the quotes, the ECN offering commission fee model. Means, there is no commission charge for Standard accounts and market maker model typically, but a spread only basis while ECN costs split between the interbank spread from 0 pip and commission charge per lot.
With its popularity and a trend of ECN trading, there are many brokers around stating its Brokers ECN Forex status. However, the only way the broker does not fake its trading conditions or statements, therefore provides true ECN is the company with the confirmed regulatory status along with its strong legit obligations.
What is NDD brokers?
No Dealing Desk or NDD Forex Brokers as it is obvious from the name does not use Dealing Desk in its operation and passing traders’ orders directly for execution, while the broker only provides a connection between two parties the trader and market itself.
That means while you are dealing with the broker of that type you get access to an interbank market where the foreign trading is performed and your positions executed automatically while registered as an offset.
▶ NDD Brokers building a structure where the client’s interests are independent, while the only cost of trading is most often a small commission per lot or a very slight markup on the spread, alike 1 pip.
▶ Most NDD companies offer variable spreads due to its execution technology, hence scalpers and day traders getting an easier and most perfect offering to trade.
What is STP brokers?
Straight Through Processing or STP Brokers are sending traders’ orders directly to the market without dealing desk intervention (or NDD) means straight to the liquidity providers the market is consistent of and the ones particular broker cooperating with.
Typically, the broker has many liquidity providers that are either banks or larger brokers generating its own bid and ask price. However, it’s still an option to execute through one liquidity provider, as some brokers practicing that as a result bringing deeper liquidity pool.
The STP execution also means there is no re-quote or delay in filling orders, as the technology executes in extreme speed, sorts quotes among the offering and filling orders at the best available price just adding-on small fixed markup usually 1 pip to the quote. Most often, the STP type brings variable spreads due to the changing bid/ ask prices, yet at a very competitive spread value usually lower than Market Makers.
However, one of the advantages among STP execution is that the broker never makes profits on clients’ losses since the company gains its net from a number of executed orders and more interested in the trading sizes.
How to choose Forex brokers?
Choosing a forex broker requires you first to figure out what type of investor you are and your goals in investing in currencies.
Each broker that features forex investments has advantages and disadvantages. Some of the most important things to consider are regulation, the level of security provided by these companies and transaction fees. Security features varies from broker to broker. Some brokers have integrated security features like two-step authentication keep accounts safe from hackers.
Many forex brokers are regulated. Brokers in the U.S. are regulated by the National Futures Association (NFA) and Commodity Futures Trading Commission (CFTC), and France, Germany, Switzerland, Austria, Canada and the United Kingdom also regulate forex brokers. Not all brokers are regulated, however, and traders should be wary of unregulated firms.
Brokers also differ in their platforms have different required account minimums and transaction fees. Before hopping on a trading platform, you may want to create a budget for your investment life. Figure out how much you would like to invest, how much you are willing to pay for fees and what your goals are. There are lots of factors to explore while choosing the right platform for you. Make sure to take as much into account as possible before getting involved.