You might be asking yourself; which type of broker is good for me? A Dealing Desk broker (DD) or No Dealing Desk broker (NDD)?
The fact is, one type of broker is not better than another because everything will largely depend on the kind of trader that you are.
The ultimate decision is up to you whether you’d prefer tighter spreads that require you to pay a commission for each trade, or wider spreads but no commissions.
Usually, scalpers and day traders prefer to have the tighter spreads considering that it is easier to make small profits in the sense that the market doesn’t need much ground to cover in order to get over the cost of the transaction.
On the other hand, wider spreads tend to become insignificant to position traders or longer term swing.
For your decision-making to be more comfortable, below is a highlight of the significant differences between STP brokers, Market Makers, and STP+ECN brokers:
Brokers are not devils…Well, the majority of them are not!!
They aim to do business with you, not to put you out of business. Come to think of it; if you happen to lose all your money trading forex, brokers will also lose customers and possibly end up winding up business.
The choice client of DD brokers is the type who (all thing being equal) breaks even. That is, a client who neither wins nor in any way loses at the end.
By this doctrine, the broker is able to make money from the transactions of the client, but at the same time, the client is able to stay active by not emptying his account. In a nutshell, brokers are determined to ensure that their clients keep coming back for more—trading!
Stay put for our next lesson on 6 vital things to consider when selecting a forex broker.
