This article will cover everything we need to know about Broker in this Guide to Broker.
Raw materials and currencies, are traded by a Broker, this operates on behalf of a third party, in addition, they have around the world with a wide selection, which defers of type, quality and regulatory structure, the difference can exist depending on the Broker that is chosen, if this becomes another country, for more details we have in this article a Guide on Broker, which will clarify the doubts we have.
Guide on Broker Why have a Broker?
A Broker with the authorization of the financial supervisory authority will help us to buy and sell financial products, since it is not possible to place our purchase or sale orders in the stock exchange directly. Due to the maintenance of standards of quality and efficiency, which was decided that we will not have access to stock exchange operations directly to individuals. Even as a company is not possible access, there are conditions to follow.
It is good to know that despite this not all financial products will be traded on the stock exchange, the market on which this book is based, foreign exchange market, is off the exchange taking its place in the Over The Counter, also known as interbank trading. Being historical between banks the transactions of currencies, which in turn only they had full access to trade, so a Broker grants access to markets, whether or not they are on the stock exchange, would become a kind of intermediary in the financial market of the world, there is more to know from this Guide on Broker, so do not lose the reading.
Broker Guide What types of Broker are there?
Directly to the point of the Guide on Broker, we must know that there are 5 types of Broker, which are: Trading desk, Market maker, ECN, STP and IB. their differences between themselves, is in the way they will be executing orders and in the spreads.
- Trading desk
With this, all orders we place will go through a trading desk, which in turn will be routed to the exchange or executed in OTC (Over The Countertransactions without the intermediary of the exchange, e.g. interbank trading) which would mean that you would become a Market Maker.
- Market maker
At the end of the previous Broker if executed that way enters here in this, now an example is also a CFD trading, where the order to the financial market will not be transmitted directly, if not that the prices will be set properly by this, because a Broker of this type, always seeks to place orders in its own system, what puts us in a dispute between customers, what in turn regularly orders them does not leave the system that has this Broker, in addition where, this Bruker wins is when the customer loses, of course also the possibility that this covers the order of the customer which will lead to a compensatory operation.
- ECN (Electronic Communication Network)
Orders will be sent directly to the interbank market, spreads are based on structure prices, flexible interbank market or an additional commission, depending on the fluctuation range of the market, the respective spread will result. In order to execute the order there is no trading table in between, the width of the market can be seen through the order book.
- STP (Straight Through Processing)
A liquidity provider will receive the order from this Broker, which will be executed by an exchange operator, as much as possible, it is someone who has direct access to the interbank market, such as a bank, which will execute the order.
- NDD (No Dealing Desk)
These are the Broker ECN and STP, these are the ones that send orders to the interbank market directly and the advantage for the client is to receive the spreads directly.
- IB (Introducing Broker)
We talk in this Guide about Broker that this is a Brokert STP, where everything is limited to a liquidity provider, which comes to be a stock exchange operator, for transactions or customers brokered from this will receive a commission. In the Forex sector is where this type of Broker is mainly used, it is not possible that the providers of the market follow a fixed pattern, there are mixed forms for this, a precise example is that in one area the broker can be ECN, like Forez operations and also be a market marker for another area, in the same way as in CFDs.
Guide on Broker Selection of Broker?
For a good choice is to consider the following point:
Which we must check our TradeDesk or if the administration of our account.
In conclusion, it is of great importance to know the Broker, and with this Guide on Broker is all covered in this regard, we hope that our readers make good use of this content.
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