My last article was about How many types of Accounts are in Forex? Hope you read it. And now in this article, I will give you the complete information about Forex Brokers. This is very important to know that What is a Broker and why we need brokers and what brokers are doing.
What is a Broker?
It’s kind of firm OR Brand who provides access to trade forex currencies, stock, Equity Indices, Metals, and Energies. Brokers provide you a platform that allows you to buy and sell the foreign instrument. Any currency trading broker called Forex Broker.
To provides these all services broker charged spread which is brokers profit or a very small portion of the volume of the overall foreign exchange market.
There are many types of broker such as;
STP Broker (Straight Through Processing Broker)
ECN Broker (Electronic Communication Network)
Market Maker (The Broker who can hold your positions)
STP Broker (Straight Through Processing Broker):
The Broker who do not have Dealing Desk or do not hold trading positions and direct Straight Through Processing your positions to the Liquidity Provider, also known as NON-DEALING DESK BROKER.
STP Brokers makes the profit from the spread only that is why normally STP Brokers have high Spread then other brokers and nowadays only a few brokers are STP Broker.
ECN BROKER: (Electronic Communication Network):
An ECN Brokers are expert in Forex Financial who uses electronic communication Networks to provide direct access to their clients with liquidity providers for the currency market. Normally ECN Broker provides very tight spread or in another word we say very low spread because they consolidate price quotation from several Liquidity providers and pass directly to the client.
An ECN Broker charges some commission from the client’s trades which is broker’s profit, and different brokers offer different commissions.
Market Maker (The Broker who can hold your positions):
Normally all brokers are doing Market making and Market Maker Brokers are providing normal average variable spread, which variates during high volatility of the market. Market Maker is an intermediary who has a license to buy and sell securities on a client’s behalf, and it’s up to them they bridge your position to their liquidity provider or not. In these kinds of the broker, they make the profit from client’s trades, if the client makes profit brokers get the loss and if client loss their money broker got profit. In simple words, you will trade with a broker instead of the direct market and broker never want to lose the money.
If you have any more questions about Forex Trading or it’s Broker, Please feel free to ask us anytime. We love to reply our users. We hope you enjoy the Free Forex Training from FxForever.