Confused about various types of forex brokers? Helps you understand brokers in 3 mins! Part 2

Different from DD, NDD can be divided into two categories: STP and ECN+STP.

STP: Straight though processing, the traders orders will be directly send to liquidity provider(also known as bank). Different STP forex broker has different quantity of liquidity providers. The buy/sell price quoted by each liquidity provider is different.

There are three key points of STP :

1: Providing liquidity: the better the liquidity is, the more favorable the buy/sell price is. If there are only one liquidity provider, then there is no price competition.

2: The types of spread. (fixed or floating ).

l The fixed spread : The spread is always fixed without adjustment based on the lowest buying price among multiple liquidity providers.

l The floating spread : the liquidity provider provides best buy/sell price, the STP broker will choose the best buy price from liquidity provider and the best sell price from broker. In this way, they can provide the lowest spread to customers.

3: Operation mode: ( instant execution or market execution)

l The instant execution will not be sent to market directly, it will be handled by brokers first.

l The market execution means order information will be sent to market directly and the price depends on liquidity provider

ECN:

Electronic Communications Network(ECN) allows customers to trade with other people. In other words, the customers order can interact with the order of other participants in the market. ECN forex traders provide participants with a market in which participants(banks, retail forex traders, hedge funds, brokers, etc.) trade with each other by sending competitive buy or sell quotations to the ECN system. Orders for all transactions will be matched in real time by a party in the opposite direction of operation. The ECN trading platform displays market depth in a data window. DOM (Depth Of Market) allows customers to see where other participants buy or sell orders, where there is liquidity, and the size of their own orders.

Conclusion:

ECN is the easiest way of forex trading. Broker benefits from charging commission not from spread.

Market makers make a profit through spread. The market makers classify customers into two types, loss-making customers and profitable customers. For loss-making transactions, instead of trading in the opposite direction, they become profits, and profitable transactions are sent to the interbank market for processing.

For NDD, with its transparent, anonymous and quick processing of orders, there is no operational platform to handle and observe brokers trading.

Generally speaking, the short-term traders who like daytime trading or scalping should choose low spread, because such traders trade frequently. For medium-and long-term traders, the spread is not as important as short-term or ultra-short-term.

Declaration:

The evidences in WikiFXs exposure articles are verified via the following processes:

1: Evidence Collection: (Chatting history records, Trading history records, Banking Transaction records and video recordings from victim).

2: These evidences will be evaluated and verified by experts who have been work in forex industry for many years.

3: The editor will review it again before the article is published.

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