Forex Brokers Types ECN, NDD, STP Forex Brokers and More

For registration with a US broker or a broker connected to a European bank, for example, during registration, various documents may also be requested which must be sent by post to their office. In brokers with middle-class regulations, the requirements and monitoring carried out by regulators are relatively looser. One thing to note here is that some brokers who claim to be STP/ECN may actually use a hybrid model. There are generally two types of NDD brokers, namely ECN and STP. It could be, we can’t even close a trading position that has been opened.

There is no central exchange, so it is impossible to have all EURUSD buy trades, for example, matched by EURUSD sell trades. Unfortunately, this misconception highlights a prevailing lack of understanding of how the market works. A good broker is one of the pillars of a successful trading career. This is why traders must carefully scrutinize the various types of brokers available in the industry to pick the best possible option. Some employ a high level of expertise and can directly access the market.

Some offer legitimate services while others are illegal and deceptive. Some are regulated by official regulation bodies while others can do pretty much whatever they want. Most traders don’t take the time to understand the difference between them in order to choose the best forex brokers, and can therefore be fooled into making unwise choices regarding their trades and investments. The STP forex broker will direct clients’ transactions straight to liquidity providers and interbank markets. This type of forex brokers usually has multiple liquidity providers, each of whom would offer different bid/ask prices . A forex broker is a company that serves as a liaison for the execution of forex trading transactions of buyers and sellers in order to earn commission, once the deal is final.


This type of forex broker mixes ECN and Market Maker brokers’ functions. It means that an STP broker has the choice to direct orders to Interbank Exchange or take a position against the trader. Some forex brokers have a high entry barrier for customers and will not spend as much time pleasing the average retail trader. On the other hand, others will allocate resources for acquiring and retaining all kinds of customers, making them more retail-friendly.

As stated earlier, another simple way to avoid scams is to know exactly what they look like. We have conducted a list of the most popular and widely spread pyramid schemes that will let you quickly detect potential fraud. In this article, we will reveal some major features and signs of Forex trading scams and pyramid schemes.

Traditional Forex Pyramid Scheme

When a broker doesn’t have a dealing desk they are either an ECN broker or an STP broker. The foreign exchange market is a decentralized marketplace that you access via forex brokers which, to say the least, are free to operate the way they want. You must have heard of terms like market makers and straight-through processing if you are familiar with the currency market.

STP brokers usually benefit from the spreads that are charged on every trade a trader makes. This spread is added to the price rate provided by the liquidity provider earlier. Therefore, spreads at STP brokers are usually variable spreads/floating spreads, not fixed. It is a type of forex broker that does not direct your orders to the interbank exchange. In other words, a Market Maker does not connect you to the real market.

forex broker types

Brokers with a good reputation will have several tools available to help their customers become better traders. 68% of retail investor accounts lose money when trading CFDs with this provider. 79.90% of retail investor accounts lose money when trading CFDs with this provider. Between 74-89% of retail investor accounts lose money when trading CFDs with this provider. Verify the trading statements and ask a service provider to prove high results. An individual or platform eager to sell you some information must prove it will really make sense under real market conditions.

Best Bitcoin Accepting Forex Brokers

They are an intermediary between retail traders and the interbank forex market. So, they operate the agency-only brokerage model and channel their clients’ orders to the liquidity providers. Before choosing the best forex brokers, you must know all the types of forex brokers out there.

  • features a high-grade ECN trading platform and offers more than 90 currency pairs that can be traded.
  • Some offer legitimate services while others are illegal and deceptive.
  • Basically, there are two types of forex brokers, namely brokers with Dealing Desk , No Dealing Desk , and Hybrid.
  • In other words, traders get the chance to trade following any economic announcements without facing restrictions.
  • If you are a beginner in forex trading and you wish to find reliable and unbiased educational resources, BRKV is the answer you’re looking for.

There’s usually no spread mark-up to pay, rather just a standard commission. It is quite common for some of the larger brokers to give you discounted commissions based on your trading volume. Generally speaking, the more volume that you trade, the more you can save on trading costs.

Conclusion: what type of forex broker should I use?

Nevertheless, on the whole, Market Makers are in stiff competition with each other to provide the closest rates to the interbank market, and, therefore, the chances that their rates will differ greatly are slim. In addition, Market Makers are able to provide significant advantages to traders, such as almost instant trade execution, flexible leverage and fixed spreads. In the marketplace, the only role ECN brokers play in executing trades is to link the buy orders to the available sell orders at that moment. The brokers do not create their own price quotes, rather, they directly display price quotes as they appear in the interbank market. Thus, their clients can see not just the best bid/ask prices but also the Depth of Market, which can help them to plan where to place their orders. aim to provide unbiased broker reviews to give traders a clear understanding of the different brokers available to them. Traders can use our free service but should do their own due diligence and make their own decisions. Rates, terms, products and services on third-party websites are subject to change without notice. We may be compensated but this should not be seen as an endorsement or recommendation by, nor shall it bias our broker reviews.

Market Makers are Forex brokers that quote both a buy and a selling price that move in tandem, dispelling a prevalent belief among traders that Market Makers are betting against their customers’ success. 79% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money. There are literally thousands of forex brokers that you can trade currencies online with.

forex broker types

The technical storage or access that is used exclusively for anonymous statistical purposes. Therefore, it is important to choose a broker whose customer service is responsive and able to guide well. Forex brokers are not angels, so of course they have their flaws too and in relation to them you can run into some problems. The regulatory status of a broker is often equated with the safety of your funds at that broker. However, there are also many countries that originally did not have regulations or regulators regarding forex, such as Montenegro and Russia. In the Euro Zone, the MiFID law applies like a ‘passport’, so that a broker who is already regulated in a Euro member state, then his license can also be used in other Euro member countries.

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With such brokers, it is very difficult to make profits, and when you do, you may not be able to withdraw the profit, let alone get your deposit back if you want to. That is why you need to check some of the reviews on any forex broker you want to trade with. ECN brokers operate a similar model to STP/DMA providers in the sense that they do not provide liquidity. They usually provide access to a smaller pool of liquidity, which are a selective network to make spreads lower. The bid/ask quotes often change which is why most STP brokers offer flat spreads.

Also known as a dealing desk broker, market makers offer bid and ask prices or currency quotes by adding the spread in the form of extra pips to the interbank quotes. Dealing desk brokers profit from the spread and usually offer fixed spreads to their traders. Their quotes are almost identical with the inter-bank quotes, with some little difference. A DD Forex broker is also known as a market marker and is the type of broker that uses a dealing desk in order to act as a counterparty to the client’s trade.

It is vital that before you start trading you are aware of exactly what these types are to ensure you have the best experience whilst in the markets. To find out more, please see below, where we discuss each type in detail. A true forex ECN broker will allow their clients’ trading orders to interact with other trading orders participating in the ECN system. ECN participants can be banks, retail investors, hedge funds and even forex brokers. Basically, participants exchange with each other by providing their best bid/ask price.

What Are the Different Types of Forex Brokers and their Individual Functions?

Overall, Blackbull Markets is the best MetaTrader 5, a forex broker. Blackbull Markets provides ECN execution across three trading accounts and a range of markets that can be traded through the powerful MetaTrader 5. However, DMA accounts can have high entry requirements and not all brokers provide them. You sort of get the best of both worlds as they are easily accessible yet still have very favourable trading conditions including deep liuqidity pools and no dealing desk interference.

Best STP Forex Broker

With this type of broker, there is no dealing desk, and this particular group of brokers includes ECN Forex brokers, STP brokers and also those which are a combination of the two. When this type of broker accepts an order it is passed directly to liquidity providers for immediate execution, rather than passing it through a dealing desk first. An NDD broker generally offers much lower spreads and promises faster execution. They types of brokers earn their money either by charging a commission or through a small markup on the spread. ECN brokers make their profits either from spreads that they charge on top of the spreads between the interbank Buy and Sell rates or from fixed trade execution commissions. However, because spreads in the interbank market are dynamic, ECN brokers cannot afford to offer fixed spreads as this would risk eliminating their commission.

Forex Broker Types

An STP forex broker is similar to an ECN broker, where all client positions are passed directly to the market through interbank exchange houses or liquidity providers such as banks. An ECN forex broker offers a true matching order execution system where the brokerage charges a small commission fee on each trade. It’s different from conventional trading, where the raw spreads are inflated artificially to cover broker costs. If you are looking to trade forex with tight spreads, then ECN forex brokers have spreads from 0.0 pips without any mark-ups. If you are thinking about trading forex online, one of the most important decisions that you will make is what forex broker to choose.

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