Forex Brokerage Market - Broker Classification

Forex trading as well as any other business involving investment of money requires professional assistance. To make it simpler for you, let’s suppose, you want to buy a property. You can walk through the process of buying only by means of certain assistants – realtors and lawyers. The same scenario can be referred to brokerage market and Forex business in the whole. Trading at Forex market also requires middlemen - brokers – who can help to profit legitimately.

Forex brokerage market is quite widespread nowadays. There appear new Forex broker types because of high demand among new traders. Despite variety of broker types at FX market their general functions and way they work are practically the same. However, some peculiarities can be distinguished in every type. In order to clarify how brokerage market works let’s define it in details.

According to common definition, Forex brokerage market stands for the insurance asset where all insurance costs are covered and handled by means of its major participants. They are governmental and private brokerage firms. In other words, Forex brokerage market consists of interactive organizations – brokerage houses or firms.

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How Do Firms Within Forex Brokerage Market Work?

Within Forex brokerage market exist hundreds of legal, half-legitimate and illegal organizations assisting to trade at FX. It is up to you to decide what broker type you will choose eventually. However, we at Broker-Rates.com strongly recommend reading independent Forex Brokers Reviews and choose to deal with a legal and licensed firm.

Commonly such firms at brokerage market have an authority to buy/sell currencies or other valuables like stocks, precious metals, commodities, etc. Any brokerage firm can offer a client to trade via different means – phone, online or offline. After making a choice a trader can select a manager or a dealer to start trading and such managers are inevitable part of brokerage market

According to demands of a client a brokerage firm can offer to open a managed account of any deposit. No matter what kind of account you will start, a broker will charge a commission (fee) for his work. Especially in a case you choose to work with managers trading on your behalf, without your active interference. Do not believe brokerage firms which claim they do not charge fees for such services. Forex dealers earn from getting their commissions from collaboration with traders. Such fees are called spreads. Low or high spreads also can say a lot about a brokerage firm status. Fees policy of a firm also depends on a range of services provided by a particular broker type.

Speaking about services offered within brokerage market they depend mostly on the policy followed by a certain brokerage firm. For instance, there can be offered to make a payment for every service separately. Or a client is offered to buy a package of services for some time period. Some may charge higher fees for better services than their rivals have. This aspect is quite individual that is why you have to weigh all pros and cons before choosing one certain broker firm.

Accessibility, qualified customer support and discount/bonus system for newcomers and regular clients also play an important role. Besides some brokerage firms can offer training centers for newbies. Sometimes they provide brokerage market researches and consult about investments. As you see, there are too many factors to figure out them all on your own. It is even harder to choose because of numerous Forex scams and frauds spreading online. And on Broker-Rates.com you can find not just Forex Brokers Reviews but also tips concerning choice of a trustworthy broker.

Surely, not all brokers are the same when it comes to their specification. There can be distinguished few classifications of Forex broker types. For instance, some firms specialize in trading only few products with or without currencies. The most common products which are traded within Forex brokerage market are:  corporate or government bonds, options, stocks, futures, commodities (like oil) or precious metals (silver, gold, etc). Every product involves certain peculiarities and a good broker should explain all advantages and warn a client about potential risks.

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Common Forex Broker Types

  1. MT Brokers
    No matter what type of broker this firm is, its main services are provided on the basis of Meta Trader (MT) platform. This trading platform is one of the most popular terminals with its unique software. If you follow any automated Forex trading strategy, you should work with MT broker.
  2. CFD and Gold Brokers If you prefer to trade not currencies but precious metals a broker providing Contracts For Difference trading will be the best solution for you. In brief, CFD is an instrument for fulfilling requests of investors with small deposits.
  3. ECN Brokers ECN standing for Electronic Communication Network broker is one of the most widespread types. Their peculiarity is in offering real time order book info. In such way ECN brokers increase brokerage market transparency in general. ECN brokers charge clients’ fees depending on the currently traded volume. Via ECN firm all transactions of clients are transferred straight on the market without NDD interference.
  4. Oil Trading Brokers Advantages of oil trading nowadays are obvious for everyone. There are plenty good brokers involved into this specific niche within brokerage market. Due to the fact oil is quite peculiar investment tool; one should choose an oil trading broker very carefully.
  5. Corporate Brokers These organizations are dealing exclusively with serious offline institutions. They are fully legitimate within Forex brokerage market. Such corporate/institutional brokers mostly invest their huge capitals into security papers, international reserve currencies or estate property.
  6. Swap-free Brokers This broker type is widespread within the minor Forex brokerage market. It is recommended for traders who use trading systems not featuring swaps policy.

 

Other Broker Types

DD Brokers

DD means Dealing Desk broker. This term stands for Forex brokerage market makers. Such firms usually offer fixed spreads. They also set currency exchange rates a bit higher or lower than the common market suggests. Such organizations work directly as intermediates between a trader and a market. They serve as the counterparty of a client who chooses not to trade with the liquidity providers.

NDD Broker Type

It means No Dealing Desk brokers. Such FX broker allows getting an access straight to the interbank market. Being a client of NDD broker you can easily trade without regular checking economical news releases. Such traders do not depend on slight fluctuations in exchange rates. NDD broker has lower spreads than DD broker type. But this spread is not fixed, which denotes that a charged fee will change from time to time. Not fixed spreads may increase along with Forex volatility.

STP Broker Type

Straight-Through-Processing brokers are totally automated and their clients’ transactions are transferred on the interbank market at once.

As you see, every newcomer can choose a broker type according to his/her preferences. In our turn, we make sure you will choose among the best presented brokers in every category. Independent broker reviews, informational support, asset management consulting and qualified advices for beginners – specification of our company’s website.

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