Best Forex Trading System

When you commence online foreign currency trading, you are going to have to set up a currency trading account with a broker. They will provide you with a currency trading platform that will facilitate all your trading activities. One of the more common currency trading platforms is MetaTrader 4, which is provided free by the broker or can be downloaded from here. This it the interface that will allow you to either sell or buy foreign currency. MetaTrader 5 is currently in development and is due for release soon.

There is a vast variety of currency trading brokers and the new trader is often confused by the type of broker. There are two primary types: Dealing Desk (DD) and No Dealing Desk (NDD). You will then encounter NDD brokers which are either Straight Through Processing (STP) and or ECN.. Electronic Communications Network.

Let’s now put some clarity into this confusion:

The Dealing Desk Broker: A Forex DD Broker makes money on spreads and by taking the opposite position to their client. They are the ‘Market Makers’ because when you, the client, buys they sell and visa versa. They are literally making the market because they can manipulate the market, because you, the trader never see’s the true market quotes.

The No Dealing Desk Broker: The NDD Broker accesses direct to the interbank marketplace, all trades are virtually instantaneous with no re-quotes or delays in communication. This is particularly important if you trade during news periods. NDD Brokers usually charge commissions, though some can also derive income from spreads. A NDD broker will either be STP or ECN + STP

Straight Through Processing: This is where the NDD broker communicates directly with the liquidity providers, the banks that trade the Interbank marketplace. There are no intermediaries so everything is executed immediately. STP Brokers do have the ability to alter spreads, which gives them options as to how they make their money. They do not charge commissions.

Electronic Communications Network: These brokers allow traders to trade against one another within the ECN, these traders could be small retail traders up to Banks and Institutions. An ECN broker allows everyone to place and execute competing trades against each other within the ECN. For this reason, an ECN broker cannot make money on spreads but make their money on commission. An ECN broker wants you to make money, otherwise they don’t earn commissions.

So what type of Currency Trading Broker do you select? An ECN broker is the most transparent, dealing in the true market, everything is done automatically without anyone watching who is in the market since there is No Dealing Desk to monitor.

The Dealing Desk broker, has the ability to manipulate the market and one of the results is ‘slippage’ where the spread can change during the execution of an order. This can have a disastrous impact on your trading strategy, as it chucks your pre-determined setups out the window!

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