20/04/2020
‼️‼️‼️‼️ What you should know before choosing a broker‼️‼️‼️‼️
Their are different brokers that cater for different needs and stretagy. You may need to carefully select a broker you suit your needs as a trader. Knowing what kind of broker your trading with mighty be important for your success in this business. Below are different kinds of broker you find out there :-
MM
A market maker is the oldest and most common type of order ex*****on. Its popularity seems to derive from yielding the highest possible profit for such a model for the broker.
Key features:
Brokers, in most cases, occupy a position opposite that of their customers and thus earn profits when investors lose. This usually raises awareness of the obvious conflict of interest.
Brokers execute orders at exactly the price indicated by the client, but this depends on the particular procedure in use. Brokers do not automatically hedge positions in the open market; instead, they use other methods to cover their exposure, such as offsetting trades against other traders, buying options, warrants, or futures, or even buying shares on the open market.
In this case, brokers spend a lot of effort on marketing strategy. Their marketing plan is usually based on expensive promotion, such as bonuses and competitions to encourage potential customers to open accounts.
ECN
ECN brokers are on the other end of the market spectrum when it comes to kinds of order ex*****on. Features of this type of order ex*****on include:
1. Brokers never take an opposing position in relation to their clients.
2. Brokers do not guarantee the ex*****on of orders at exactly the price indicated by the client because in this case, investors place their orders on the interbank market, where guaranteed orders do not exist (a general feature of the forex market which investors must know and understand).
3. ECN brokers do not usually run additional promotions, such as bonuses or contests.
4. Initiation of trading usually requires a large first deposit, for example, $10,000 (US).
5. The leverage of ECN brokers is also often limited (for example, 1:5).
So, as we see in this case, people who decide to trade through an ECN broker actually gain access to the interbank market, where brokers do not take positions opposed to their clients in the hope that they will lose. The ECN trading model, however, is reserved for individuals with huge investment portfolios who are prepared to make long-term investments.
STP
Forex brokers offering straight through processing ex*****on of orders fall somewhere between the MM and ECN models. Features of the STP model include:
1. Brokers, as in the case of ECN, act only as intermediaries, transmitting client orders. Brokers, again as in the case of ECN, do not offer guaranteed orders. Rather, ex*****on of orders depends exclusively on the current situation on the financial markets.
2. Brokers, unlike in the ECN model, typically offer a very wide range of promotions.
3. Initiation of trading is possible with minimum deposits as low as $50 (US).
4. Leverage is also high, up to 1:1000.
Brokers of this type, as we can see, combine the qualities of ECN (access to real market conditions) with the positive elements of an MM offer (interesting promotions, minimum deposits, high leverage on accounts). Therefore, they afford access to the most favourable market conditions while offering very interesting promotions and types of accounts available even for individuals with minimum capital contributions. Therefore, STP-type brokers should be selected by experienced investors seeking proven solutions on the market.
