Forex broker Type

With so many Forex brokers to choose from, it is certainly no simple task to find the ideal forex broker that suits your trading style and preference. As you may have know that foreign exchange is an unregulated market because is not traded on an exchange, which means that prices you see and get from one broker could vary from those of another. Forex brokers fall mainly into one of two classifications


  • Market Makers (MMs)

  • Electronic Communications Network (ECN) trading


The vast majority of the brokers around are Market Makers (MM). They offer traders the means to trade with and against the broker. MM offer a single bid/ask price per currency pair. They usually offer a fixed spread.

The second group, are the Electronic Communications Network (ECN) brokers. They offer traders the ability to post their own bid/ask rates. As a result, traders often see multiple bid/ask prices driven not by the broker but fellow spot traders and liquidity providers (banks). They usually offers you choice quote.

Market-Makers

  • Pros



    • Provide free charting software and news feed

    • Prices are less volatile comparing with the ECN brokers

    • Often provide a user-friendly and analysis interface



  • Cons



    • They may take position against you

    • The prices they offer, may be worse than ECN brokers

    • They may manipulate the prices and trigger your stops or prevent you from reaching your target profits. It is because they may be taking a losing position against you

    • Huge slippage of prices usually occurs during data release hours, or their platform may not allow the placing of orders during high volatility

    • Most of them discourage scalping, which may have a min. stop loss in place or the scalping execution may be very "manual" or complicated




ECN Brokers

  • Pros



    • You can usually get a superior bid/ask prices, because they come from several different institutions or banks.

    • Spreads between bids and ask may equal to zero spread or tiny spreads at times of liquidity (mostly in the afternoon, SG time)

    • They will not be trading or having any position against you but will pass on your orders to a bank or another customer on the other end of the transaction

    • You will be able to offer a price between the bid and ask with a chance of it getting filled

    • If they support Stop-Limit orders, you can prevent slippage during news by making sure that your order either gets filled at the price you want or not at all

    • Prices may be more volatile which will be better for scalping



  • Cons



    • Most do not offer integrated charting

    • Most do not offer integrated news




The resource is from Ezubearticles

Article Source: www.findyourfx.com

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