Type of brokers:
There are different types of brokers. Their type depends on their service. In general there are two types of accounts, Electronic Communication Network (ECN) AND Market Makers.
ECN BROKERS:
ECN brokers provide genuine bid/ask rate which they collect from banks and other financial institutions. A trader can execute a trade at very less SPREAD and the spread always stays very low and it is not fixed. A genuine ECN broker never counters trade against the customers. ECN brokers take commission from traders for every trade. There are different types of ECN brokers, Institutional and retail brokers
Institutional Brokers are banks, financial firms, etc. While the retail brokers are group of people or companies who starts a brokerage firm with all regulations and provides traders a good Environment.
MARKET MAKERS:
They create the market conditions, they displays their own ASK and BID rate, they always keeps manipulating the rates. A fishy thing about these kinds of brokers is that that they always counter trade against the traders. Yes when a trader quote a trade at given bid rate there will be no trader in the opposite end to accept that trade with that much bid rate, so broker have to accept that trade. If trader losses the trade Broker wins the trade.
They attract new traders with good Trading platform conditions and new technologies. Market makers are always dangerous they take money in the name of spread when your trade is executed. The wins when you lose so it is not an exchange it is gambling.
If we make key notes against ECN and MARKET MAKERS we can analyze good points
1. Both the brokers can get permissions from Central Banks, yes both kind of brokers can get permissions from central banks and get regulated. It doesn’t mean every broker in the forex market is regulated. Some countries don’t even accept forex trading. It is illegal to trade FX in those countries.
2. Which broker provide good platforms to trade, Now-a-days every top broker providing both kind of accounts ECN and general account
3. Every kind of brokers can see your trades except genuine ECN brokers.
4. All over the world there are different kinds of ECN and MARKET MAKERS regulated in different countries and have different kind of agendas.
5. ECN brokers earn through commissions and MARKET MAKERS earn through different ways.
6. Selection of brokers always depends on type of trading you opted.