Choosing the best Forex broker doesn’t just make trading easier for you: it’s also a partnership that can help increase your potential profits, even to an exponential scale.
The best Forex broker is the broker that fits with your particular trading style or level of experience, or you may find yourself experiencing losses that could’ve been avoided. So, if you want to make your trades with the best hands possible, you need to know the kinds of Forex traders and evaluate what type is best for you.
The three types of Forex brokers
Fortunately, there are only three kinds of Forex brokers that you can work with:
- No Dealing Desk (or STP) brokers
- Dealing Desk (or Market Maker) brokers
- Electronic Communications Networks (or Blueberry Direct) brokers
So, how do you pick which one to work with?
No Dealing Desk or STP brokers
They act as intermediaries between you and your trade transaction, by bridging you and the liquidity provider. They offer the best composite quotes from various traders, which you can then directly buy and trade yourself. You can also have the broker make the transaction for you for a fee.
Most of these brokers will have variable spreads with each trade you make, which can give you a lot of flexibility when it comes to setting up a trade. Spreads are non-negotiables to any trade, so if you don’t have much experience or are looking to minimise risks, an STP broker can help match you to a client with a spread where all of you can reasonably profit.
Dealing Desk or Market Maker brokers
Market makers take the opposite side of your trade, but this doesn’t mean that they’re working against you. They are just trying to find the best seller for you to buy or sell currency from. And because they take the opposite side of your trades, they’re more likely to find you a liquidity provider that best matches your lot and trading style.
Since these brokers already have a network of partner traders, they always have fixed spreads. It’ll be up to you if you want to take them up at their quotes since the point of working with a market maker is that you don’t have to look too far or negotiate to find a favourable trade.
Electronic Communications Networks or Blueberry Direct brokers
Blueberry Direct brokers are a little bit in the middle ground between STP and market makers. They usually run a digital platform where traders and brokers can directly trade with each other, based on their best quotes and spreads. You can gain access to plenty of different trading options like hedge funds, investors, and even banks. While they require a higher deposit than other brokers, they’re perfect for people who can change their trading strategies on the fly.
The Blueberry Direct does not set spreads and quotes either. What you’ll see on the platform is the best price that each trader will have at the time. And since you have a larger list of participants to trade with other than just traders and brokers, Blueberry Direct platforms are perfect for speculative currencies or for getting experience in trading with currency pairs that you otherwise won’t have access to.
How do you know which one is best for you?
For people new to Forex trading, a dealing desk trader or market maker is an excellent choice. Since they take the opposite side of your trades, it’s a great way to build up experience while minimising your exposure to risk. The only downside is that they have more control over your trade than you might be comfortable with since they can just offset the trade immediately if they think the market is no longer in your favour.
Once you’ve acquired more experience, you can try no dealing desk or STP brokers for more versatility with your trade transactions. Their flexibility and a reduced role in overseeing the trade is great for developing your skills at market analysis, while their variable spreads and quotations allow you to develop and refine your trading style.
But if you really want to enter into the nitty-gritty of Forex trading, then a Blueberry Direct platform is your best bet. Choose a broker that offers a sizable lot and a generous margin to trade with, since players in these arenas are bigger than your usual single trader
As a beginner trader, no matter which type of broker you choose, we recommend that you trade with a regulated broker to add a security layer to your funds and to make sure that your broker complies with all the rules and regulations that protect you from mishandling of investments.