Every novice investor who wants to invest his capital in the Forex market, faced at the initial stage with the choice of a broker. After all, there are a huge number of them and the principles of work are different for everyone. However, the majority of players in the market can be grouped with each other according to certain parameters, such as the principle of working with traders, strategy of behavior in the market, etc. That is why we will consider now only general characteristics, brokers, and already knowing them, a novice investor himself will be able to choose who needs him.
1. DD (Dealing Desk). In some countries, such brokers are called dealing centers or market makers. The income of such a broker consists of unprofitable clients’ transactions, and it can also be formed due to the difference in the spread, which is due to placing your own orders and supporting fixed spreads. That is, in other words, such a broker actually manages the market by buying financial instruments from traders when they want to sell them, and vice versa buys out the tools when they sell them.
When working with such a broker, you need to understand that in order for it to work successfully, such a broker will rank clients by success groups. That is, for example, if a client gets a higher yield, his orders will be monitored more carefully and in the period of high volatility, orders of such clients will be executed late in comparison with orders of clients from a less successful group.
2. STP – brokers. Such brokers work only with certain types of operations and clients, in particular, with international banks. The principle of their work is that orders are sent directly to international banks, so-called suppliers, the number of which may be several. And the more such counterparties suppliers are, the higher the liquidity, which positively affects the client’s profitability, because the broker directs the deals of his clients to the bank that offers the best terms of the deal!
3. ECN is a broker. Such a broker is a platform where all participants (traders, market makers, banks) work with each other according to the principle of pure competition, that is, making the most optimal buy and sell orders corresponding to the market price. One of the drawbacks of such a broker is that it charges a commission for trading, but also has its own advantages, which are expressed in the absence of so-called “anti-scalping”, as well as in the presence of low spreads.
Thus, in this article we have considered only the main classifications of brokers in the international market. In our next articles we will dwell in greater detail on the principle of obtaining the profitability of each of them and tell you how to choose the broker to the investor right after all.
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