Choosing your Forex broker

Forex Brokers

An important consideration when opening a retail Forex trading account involves choosing among the different types of Forex brokers available to handle your Forex transactions. This represents an important decision, because the type of Forex broker chosen can affect both the quality of service you receive, as well as your transaction fees and dealing spreads.

The Three Main Types of Forex Brokers

When it comes to the key consideration of what type of Forex broker to use with respect to what their Forex quotations are based on, three main choices exist:

  • No Dealing Desk
  • Market Maker(Dealing desk)
  • Electronic Communications Network

Each of these three different types of Forex brokers have a different way of handling transactions and executing orders.

No Dealing Desk Forex Brokers

The No Dealing Desk or NDD type of Forex broker lacks a dealing desk, as the name implies. Nevertheless, it instead offers the best composite quotes obtained from the multiple Forex quote providers that give the NDD broker its liquidity in the Forex market.

Typically, each of these providers will post their best markets with the NDD Forex broker. The broker then executes transactions and watches and fills orders for their clients accordingly. The NDD Forex broker generally either charges a commission or they widen the bid/offer spread in order to make a small profit on each trade executed, sometimes they do both.

NDD brokers do not trade against you though and for this reason is probably why they offer the best overall trading experience.

Market Makers

A Forex market maker will generally offer their customers a two sided market that comes from a specialist Forex trader operating as part of the broker’s own in-house dealing desk. They basically open a trade to counter your own and so in affect trade against you.

This type of Forex broker is not the best option, you will be offered tighter spreads but this comes at a cost. Market makers trade against you, can apply re quoting and can restrict where you place entry points, stop loss.

Electronic Communications Network (ECN) Forex Brokers

An Electronic Communications Network or ECN Forex broker generally does not have its own dealing desk. Instead, the broker provides an electronic trading platform in which professional market-makers at banks, as well as traders and other Forex market participants can enter bids and offers through their system.

An advantage offered by some ECNs is that the trader posting the price can be given some degree of anonymity. This can suit traders who do not wish to give away the fact that they are on the bid or offer.

UK only option.

There is another form of trading only available in the UK, it’s called “Spread betting”.

Spread betting allows you to bet on the price fluctuations of various financial markets. Spread Betting accounts operate similar to the standard Forex accounts, but enjoy special tax-free status in the UK and Ireland.

Who to choose?

The choice is yours, the Forex market is very competitive so there are a lot of great brokers out there. If you are not happy with your current broker it’s best to move and find one that suits your needs.

During my trading career I have used many different brokers and it is basically down to trial and error. You need to be able to trust your broker to have confidence to trade with them.

Currently, and this isn’t an endorsement but I use FXCM, they offer the best trading solution for my needs with easy to use trading apps for the ipad and smartphone. This enables me to be confident I can trade on the go, with ease. Finding the best broker for yourself does take time but it is essential to take your time and find the right broker that meets all of your criteria.

 

Module 1: The Basics

Module 2: Market Analysis

Module 3: Price Action Setups

Module 4: Chart Setup

Module 5: Trade Management

Module 6:  Trade Psychology

Module 7: Continue your learning