Which type of broker to choose? Dealing desk or no dealing desk (Trader Broker vs Broker)
One type of broker is not better than another because it will all depend on what kind of trader you choose.
The decision is yours. Choose a smaller spread by paying a transaction commission or choose a wider spread without paying additional fees.
Usually, day traders and scalpers prefer smaller spreads because it is easier to take short-term profits.
Meanwhile, wide spreads tend to be insignificant for long-term swing or position traders.
To make it easier for Customers to make decisions, the following is a comparison between Market Makers, STP brokers, and STP + ECN brokers:
| DEALING DESK (MARKET MAKER) | NO DEALING DESK (STP) | NO DEALING DESK (STP+ECN) |
|---|---|---|
| Fixed spreads | Most have variable spreads | Variable spreads or commission fees |
| Take the opposite side of the Customer's transaction | Bringing Customers together with liquidity providers | Bringing Customers together with liquidity providers or other Customers |
| Artificial quote | Prices are from liquidity providers | Prices are from liquidity providers and other ECN participants |
| Orders are filled by the broker at discretion | Automatic execution, no re-quotes | Automatic, no requotes |
| Displays Depth of Market (DOM) or liquidity information |
NOT ALL BROKERS ARE BAD.
Contrary to information you may hear from elsewhere, forex brokers really don't roam out there to trap or cheat.
All they want is business! Think about it, if you lose all the money in a trade, won't they lose customers too?
The ideal partners of a Dealing Desk broker are those who are equally break even. In other words, in the end neither win nor lose.
In this way, the broker earns money through the spread of the Client's transactions, but at the same time the Client maintains the status of the game by not depleting the margin account. In essence, the broker wants Customers to keep coming back and adding more!