Online forex trading has grown in popularity over the last decade, owing to the ease with which you may enter the trading market. The majority of novice traders throughout the world select forex trading as a knowledgeable activity to make money or as a side activity in their spare time. In most circumstances, forex trading may be a pleasant and engaging pastime.
Forex trading, regardless of how or why you trade, should be done through the simplest and most trustworthy forex organisations. Because there are hundreds of online forex brokers, it is essential to evaluate a number of the elements that you must consider when selecting the best forex broker.
Different Types of Forex Companies
There are Desk Forex (DD) and No Desk Forex (NDD) brokers, as well as Hybrid Forex Brokers.
Through a Dealing Desk, Forex Companies
Market Makers are firms that determine the buying and selling prices on their electronic trading platforms without always taking market prices into account. During this type of trading business, the customer makes trading requests to the corporation, and the trading company forwards them to the liquidity providers together with the rest of the traders’ demands. And these trading firms take the other side of the traders’ transactions. Where they profit from the spread and supply liquidity.
Forex Firms Without a Dealing Desk
Unlike the previously stated forex firms, non-dealing desk forex firms provide as a link between traders and liquidity sources such as central banks. It directs trading requests to liquidity providers using STP and ECN technology, allowing clients to access the market more efficiently and quickly.
Trading firms without a dealing desk are classified as
STP (Direct Processing)
ECN (Electronic Communication Network)
Hybrid (STP + ECN)
STP (or direct processing) technology does not necessitate the use of a transaction desk. All orders are routed to liquidity providers, and charges are performed in accordance with the bid/ask price offered by liquidity providers, which include trust funds, central banks, and investors who function as counterparties to every deal.
This form of trustworthy forex company serves as an immediate interface between clients and liquidity providers, and these forex firms rely solely on market prices without re-processing or pricing every transaction.
ECN Trading Companies
There are many similarities between STP and ECN trading accounts, but the most significant distinction is transaction routing. As previously stated, the STP broker can select which liquidity provider from their pool of liquidity would execute the transaction, whilst the ECN broker operates as the primary liquidity hub otherwise.
Because it is represented by banks, hedge funds, and other major market participants, the ECN broker effectively serves as a large source of liquidity.
ECN brokers obtain their rates from significant financial institutions such as market makers, central banks, and trusts. These are all interconnected in order to find counterparties to requests that they cannot handle themselves.
Hybrid Forex Companies
Hybrid brokers provide a combination of STP and ECN, providing traders with high-quality customer support, good educational materials, a variety of market analyses, and the option of completely automated order entry.
Market makers are avoided by these trading businesses. Trading on non-desk trading models may be a win-win situation for both traders and forex firms. The trading firm does not want traders to lose since they will gain more from the value differences or commissions resulting from these transactions, and the more traders there are, the more their trades will rise, and therefore the higher the profits on the broker or trading company.
How to Select the Easiest Forex Brokers
1. Select a Forex broker that is regulated and licensed.
Oversight and licence are important considerations when evaluating any online forex firm. It is critical to open a forex account with a trading organisation that has been licenced by the right authorities!
You may confirm this by looking at the company’s address and seeing whether there is an identity number published on the company’s trade website, because financial licencing regulations and legislation vary from place to place.
Here are some examples of regulatory bodies:
Australia: Australian Securities and Investment Commission
New Zealand: Financial Markets Authority (FMA)
– United States: includes the National Futures Association (NFA) and also not forgetting the Commodity Futures Trading Commission (CFTC)
Switzerland: Swiss Financial Market Supervisory Authority (FINMA)
United Kingdom: Financial Conduct Authority (FCA)
Cyprus: Cyprus Securities and Exchange Commission (CySEC)
Jordan: Jordan Securities Commission (JSC)
The licencing and control provide required insurance for your cash against any fraud or financial troubles you may face with any online FX firm. Furthermore, all deposits must be in accounts that are completely separate from the broker’s personal money, implying that they are not utilised for the broker’s benefit.
One of the most significant benefits of the most dependable forex firms is that the financial services compensation system, which is a system that guarantees the money of its clients in the case of the forex company’s bankruptcy.