Forex traders have to choose the type of broker, should it dealing desk or no dealing desk broker, Which one is better? For handling the foreign exchange transactions effortlessly.
Many traders are at crossroads when choosing the type of broker to use.
The kind of broker for an individual depends on essential factors.
It is imperative to choose the best broker as it directly impacts the quality of service received, transaction charges, and dealing spreads.
Types of brokers
For the safety of your capital, whether you choose a DD or NDD broker, always consider the regulated broker.
Let’s look at the two types of forex brokers in details:
1. Dealing desk brokers (DD)
Also known as market makers have their in-house dealing desk and maybe on the opposite side of your trade.
Therefore, DD brokers gain as you lose and make a loss as you win in a trade.
Dealing with a DD broker has two main advantages…
First, DD brokers have fixed spread because they are on the opposite side of your trade.
Secondly, DD brokers afford you the luxury to trade using minimal capital while implementing proper risk management practices.
2. Non dealing desk broker (NDD)
The NDD broker is also known as the no dealing desk as they don’t have a desk to execute clients’ orders.
Generally, they make profits from commissions or spreads.
Furthermore, NDD brokers are subdivided into two, as outlined below:
Straight through processing (STP)
STP broker provides a link between a trader and a liquid provider such as hedge funds, banks, and other forex brokers.
You may not prefer STP brokers as they make profits by increasing spreads. Also, you will not be able to trade with small capital.
Electronic communication network (ECN) broker
ECN broker provides a direct interaction between the ECN trader, liquid provider, and other ECN users.
This type of broker makes profits by charging commissions on every trade.
Which Broker Should I Choose?
The dealing desk broker is mostly suitable for new traders.
The new trader will have the chance to learn the basics of proper risk management.
Additionally, the new forex traders will test their strategies and build confidence by trading on small amounts of capital before investing colossal money.
On the other side, NDD brokers are suitable for the day trading and scalping traders where every pip counts.
Also, with NDD brokers, you will have a better spread.
However, you will feel the pinch for the commissions charged by NDD brokers in every trade.
Also, you will be required to trade with big capital.
Conclusion
Whether you choose a DD or NDD broker is entirely a personal decision that is affected by the type of forex trader that you are.
Your level of experience in forex trading has a significant influence as you decide on any of two above forex broker.
The two types of forex brokers execute and handle transactions differently.
Must Read: Different Types of Forex brokers in Global Markets
Must Read: 10 Key Factors while choosing an Online Forex Broker
