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First, you should understand different business models of brokerage companies. From a business model depends whose side is a broker on. There are three main models: STP forex brokers, dealing desk forex brokers and Hybrid forex brokers. Second, you should understand what kind of forex account do you need. |
STP Forex Brokers
STP - Straight Through Processing
STP Forex Broker sends orders to a liquidity provider automatically, and on the way asks for some commission and some spread. Here, the broker makes money regardless of the market movements.
ECN - electronic trading system which pairs offer and demand without a middle man (in this Case Forex).
Dealing desk forex brokers (Closed loop)
The customer buys from the forex broker and sells to the broker. If the trader makes money , broker loses money, and vice versa. Most small traders have no experience and 95% of them will lose money.Most traders spend 95% of their deposits in 2-3 months.
Hybrid forex brokers
Broker sends some customers to the liquidity providers and keeps some in house or (and) keeps some trades in house and sends some to the liquidity providers.