Dfference Between Forex Market Maker, ECN and STP Broker
Choosing the right Forex Broker is not easy, there are several Forex Broker models to choose from and each broker offers different benefits and trading tools.
However, choosing a broker should be based on your specific trading needs, expectations and your trading strategy. The three broker models should be understood fully to help you choose the best Broker for your trading.
Market Maker Forex Brokers, as the name suggests, this broker actually makes the market where you trade. The broker can feed prices that have no correlation with the real Forex markets (Interbank market) and more importantly, each time you buy or sell an order, your broker is the counterparty to your trades. This means when you win the broker loses, and when you lose, the broker wins.
There are many traders that have serious concerns with market makers due to the conflict of interest between client and broker. Traditionally, Market making brokers have issue accepting profitable trading strategies, Forex Robots and systems and can use techniques such as trading restrictions and minimum market limits/levels to protect their profitability.
ECN Brokers uses an execution flow that is completely opposite to a market maker. Through technology, the ECN Broker allows traders direct access to the real Forex markets through its institutional broker account with Banks, Forex Exchanges and Liquidity Providers. An ECN broker will feed core/raw spreads to the MT4 platform and charge an ECN commission on volumes to generate a profit.
As the ECN model requires larger volumes to make profits, there can be specific deposit, minimum trade size or volumes requirements and this can out-price a normal retail trader from trading with an ECN broker. ECN trading is highly beneficial for professional, high volume and profitable traders looking to avoid the conflict of interest that a Market Making broker presents.
STP Forex Brokers offer more affordable direct-to-market trading for retail clients using real market prices, automatic order execution and the benefits of using banks, FX exchanges and other liquidity sources for order filling.
STP trading gives Forex traders the same execution advantages as ECN brokers such as no dealing desk intervention, interbank pricing , order filling at real market prices, best bid/best ask pricing and best execution policies. Core spreads are marked-up to give the broker profitability without acting as the counterparty for client's orders.
Both STP and ECN brokers are specifically suitable for Expert Advisors, Forex Robots, Auto-Clickers, News trading, High Frequency Trading and other profitable trading strategies due to the conflict free order execution flow and the "no risk" policies used by these brokers.
I am happy to answer any questions you might have
Regards
George
