What type of forex broker to choose - DD, NDD, STP or ECN?
Before you start trading Forex, you need to choose a broker. Today on the Internet there are many terms related trading technology and types of Forex accounts. DD or NDD, STP or ECN - to choose a novice trader, and that is suitable for professional trading? Not to be mistaken in choosing a Forex broker, you need to learn to understand their purpose.
Recently, there was only one technology trade - DD (Dealing Desk), which consisted in the fact that the market was attended by two parties: the dealing desk and the trader. This loss for one of the parties turned into profits for the other, and vice versa. This technology trade is the least attractive to traders because here there is a conflict of interest. DD is inherent in the existence of a broker requotes and slippage, and the inner quotes can be quite different from market prices.
Currently, however, more and more brokers switches to a different technology - NDD (No Dealing Desk), through which a trader can enter the interbank market without dealing center. When interacting with the trader NDD broker is completely absent a conflict of interest, since the transaction are displayed directly on the market, bypassing the DC. During the processing of orders NDD broker charges the trader's fixed commission rate, which is determined based on the volume of positions and traded currency pairs. For NDD brokers peculiar type of market order execution «Market Execution», according to which the position is opened at the current price. If at the time of the transaction price changes on a few points, the order will be opened at the current price without any additional requests, as is typical of another type of execution of orders «Instant Execution», inherent DD brokers. In this case, when a broker requotes ask for confirmation of the trader on the opening of the transaction at the new price. In the case of «Market Execution» the deal will immediately as soon as the order is activated by the opening of the transaction. The price can be either worse or better than the one that was specified when the order is triggered.
Disadvantages NDD brokers are more stringent requirements for the minimum deposit and volume of positions opened. In this regard, there are increasing brokers hybrids: DD + NDD. When you open a transaction volume of less than 0.1 lot your counterparty is directly the broker. When you open a transaction volume of more than 0.1 lots, these positions are displayed on the interbank market.
NDD brokers typically provide STP or ECN account. STP brokers (Straight Through Processing) are intermediaries between traders and liquidity providers (larger brokers and banks). They send orders to their customers directly to the liquidity providers in exchange for remuneration in the form of the difference of the spread. The more liquidity providers broker has, the greater the competition between them and more profitable for the trader. STP brokers do not trade against their customers, they usually add one or half a point to the current spread, which offers the best provider of liquidity, and this is their income.
ECN Brokers (Electronic Communications Network) work on the model of STP + ECN. In addition to the liquidity providers the customer can see the application of banks, market makers and other traders. If STP brokers derive traders bid on the interbank market on its own behalf, the ECN Brokers send orders directly to their customers. Traders get the best prices and with the other players see the application in glass prices. For their services ECN Brokers charge a fixed commission rate, which is specified in trading conditions when opening an account.
If you are on a serious forex trading, we recommend that you pay attention to the brokers who have accounts with ECN technology NDD. As a result, you get transparent trading environment with access to the interbank market, the best rates and instant order execution, as well as complete anonymity, which is the absence of a witness for you dealing center.