The world is changing really fast and if you want to succeed, you need to move along with it. That is why you should not hesitate to use all the electronic devices and other helpful things that everyday life can offer you. So with the help of the Internet for example, you can stay at home now and make money just because you have made a decision to open a retail forex trading account. But when you do it, you need to think of something that is quite important – you need to make a choice – which type of broker to choose, so that you will be happy with the final result. After all this is a decision that will affect not only the transaction fees but also the quality of the services that you will receive. This is not really an area that you can deal on your own, due to the reason that it requires certain skills and knowledge, and the best is to rely on someone who already has the experience to fulfill it in a way that you will be pleased. After all this is not like you are buying clothes, when you know what your size is and you just go into the shop knowing exactly what you want.
That is why you need to look for some more information what your variants are and to understand with simple words how to distinguish the different brokers. In general, they can be divided into two groups – Dealing Desks and No-Dealing Desks.
Dealing Desks
The first group is also known under the name Market Makers and the reason for this name is that the forex brokers, operating through Dealing Desk, literally create a market for their clients. The way they make money is through spreads. The interesting thing here is that this type of brokers, usually take the opposite side in a deal. With simple words this means that the broker offers a price for the quote that you sell. You may think that there is a conflict of interests here, because the broker makes money from the difference that there is between the quotes for selling and buying, due to the reason that he is the one that offers both quotes. But they are actually indifferent to the decisions of an individual trader.
Another thing that may bother you when choosing to have such type of a broker is that the client can not see the real interbank market rates. But this is not considered as something negative, because the competition among brokers is so big that the rates that are offered by your broker, using the Dealing Desk are as close as the interbank rates or even the same.
No-Dealing Desks
The other group – No Dealing Desks can be subdivided into two – Straight Through Processing and Electronic Communication Network plus Straight Through Processing.
This type of brokers can be described as bridge builders, because their job is to link two parties together. They usually charge a small commission or put a markup by slightly increasing the spread.
The first subgroup, are brokers that have a STP system through which they pass their clients` orders to the liquidity providers who have the access to the interbank market. They usually work with many providers and each one of the providers makes his own bid and ask for price.
The second subgroup is ECN, and the brokers here allow their clients` orders to interact with other participants` orders. In such a way, all the participants that take part in this system, trade against each other, trying to give the best bid and ask for the best price.