An A-Book model executes orders externally, and a B-Book model does not. Micro, ECN, STP, Crypto and Demo Accounts – there’s an option to choose from for each type of trader – beginner, intermediate, experienced. The best brokers will provide an environment that allows you to focus on your trading.

types of forex brokers

ECN brokers in forex only send your order directly to a liquidity pool. The brokers do this to get better prices and more favorable spreads. So, when you make money, the liquidity providers pay the profits. A forex broker is a financial brokerage firm that acts as an intermediary between you and the market, providing a platform for traders to buy and sell currency pairs. Forex brokers will charge a commission or spread on each trade in return for executing a buy or sell order. A Forex broker, therefore, is nothing but an intermediary link between the trader and the market.

The Three Main Types of Forex Brokers

To make your decision at least a little bit easier, here is a quick checklist to perform on each broker that makes it to your shortlist. Forex brokers allow individual traders, like you and me, to trade the financial markets from the comfort of our homes. In the last century, trading was reserved for the big players, like hedge funds, large commercial and investment banks, and wealthy individuals. You had to have millions to qualify as a high-net-worth individual and to have access to global markets.

types of forex brokers

B-Book brokers still use a live price feed, usually obtained from a prime broker or an aggregated average price feed obtained from multiple sources, taking prices from several banks, exchanges and market makers. In the OTC FX and CFD trading industry, there are many thousands of brokers catering to a variety of different customer profiles. Since the start of the twenty-first century, the online trading industry has exploded. It’s no longer just top-tier financial services companies buying, selling and trading FX at inter-bank rates. The universal distribution of internet connectivity, relatively high-performance computers in everyone’s homes, easy-to-use trading applications and low-cost derivatives have made the industry appealing to many.


They are suitable for traders who prefer low spreads without paying a commission. However, some STP brokers may have a minimum deposit requirement and may not offer the same level of market depth as ECN brokers. STP brokers are similar to ECN brokers in that they provide direct market access.

  • This is why traders must carefully scrutinize the various types of brokers available in the industry to pick the best possible option.
  • You will have access to a high-liquidity pool
    full of competitive bid and ask prices, and you will know that – whatever
    position you take – your broker is not taking a position against you.
  • This coupled with the ubiquitous MT4 (downloadable) platform and a functional mobile application, comprises LCG’s online consumer offerings.
  • Via leverage, it gives traders the possibility to speculate on the currency market moves.
  • It becomes even more difficult to choose when a forex broker is hell-bent on ensuring that none of their customers enjoy consistent profits.
  • Fortunately, those times are behind us as most brokers are strictly regulated nowadays.

In this case, the trader’s computer can be linked to the broker’s remote server, thus eliminating factors from the trader’s end, which could delay executions, such as slow internet connections. When planning to succeed in foreign exchange, forex traders should make sure that they choose a broker which can offer their required services without engaging in fraudulent activities. Traders want quick execution times, stable trading platforms, fast customer support, and protection of their trading capital. It can take days, if not weeks, to go through all the broker offers available.

Types of Brokers in the FX Markets – What Type of Broker is AvaTrade?

It is a fee charged for providing access to the market, and it can either be fixed or variable, depending on the type of the trading account. Pepperstone offers uncomplicated access to the markets, which allows clients to focus on the complicated task of successfully trading the markets. Pepperstone is ideally suited to traders who want a manageable range of low-cost offerings, multiple choices of user interfaces and account types, and efficient customer support. Competition among forex brokers is currently intense and most firms find they must eliminate as many fees as possible in order to attract retail customers. Many now offer free or very small trading fees beyond the spread.

Somewhere along the way, forex brokers have evolved from solely being middlemen and becoming principals, dealers and agents. Some forex brokers have a high entry barrier for customers and will not spend as much time pleasing the average retail trader. On the other hand, others will allocate resources for acquiring and retaining all kinds of customers, making them more retail-friendly. When you choose ECN brokers (or similar), your order goes to the liquidity pool created by banks and other institutions. So, in reality, you are still trading with market makers, just on a larger scale. For people new to Forex trading, a dealing desk trader or market maker is an excellent choice.

Market Maker Brokers:

Low spread costs, an emphasis on customer service and education, actionable research, and functional user interfaces make this broker well-suited to compete in the online forex broker market. The clients of a forex broker include retail currency traders who use these platforms for speculation on the direction of currencies. Their clients also include large financial services firms that trade on behalf of investment banks and other customers. Straight-Through Processing (STP) brokerage firms are also known as Direct Market Access (DMA) brokers. These brokers give their traders direct access to the interbank FX market, where pricing and execution is done by the big banks acting as the liquidity providers.

types of forex brokers

Buying always takes place from the ask price, while selling from the bid. The trading accounts differ based on the exchange broker’s business model. No-dealing desks, for instance, use either the Electronic Communication Network (ECN) technology or the Straight-Through Processing (STP) model.