There are many types of forex brokers that are known to world traders. According to a study, in 2016, there were around 1,231 forex brokers worldwide. A large number of forex brokers certainly makes traders confused about choosing.

Which brokers are best and which ones are good for beginners. Which broker is the most trustworthy. Choosing a broker is actually easy if you understand the different types of brokers and are able to compare the services they provide.

Judging from how the system works, there are two broker types: brokers with a Dealing Desk (DD) and without a Dealing Desk (NDD). DD brokers are also often dubbed dealer brokers (Market Maker). 

NDD type brokers can be classified into two more, namely Electronic Communication Network (ECN) and Straight Through Processing (STP). In addition, there are also forex brokers that provide DD and NDD facilities at the same time, so they are dubbed Hybrid brokers.

Types of Forex Brokers with Dealing Desk (DD)

DD brokers work by positioning themselves as counterparties in every trader's transactions and profiting from the spread. All trader orders will go to the broker's desk (Dealing Desk). It could be said that they “created the market” themselves.

They act as sellers and buyers in the market. This system is actually common among banks and large liquidity providers, so its status remains legal. However, it will be a problem when the DD broker is not regulated by an official government agency.

Without regulation, this broker can manipulate prices so that other traders lose. Unregulated DD brokers who often manipulate prices are also known as “Bucket Shops”. Didimax forex broker is one of regulated and trusted brokers.

A bona fide DD broker has a number of distinct advantages. They offer instant execution. Able to provide trading accounts with very low minimum capital requirements. Able to provide various extraordinary facilities such as high leverage, zero spreads, and others. 

Types of forex brokers like DD brokers can be an option for traders, if they have obtained permits from credible regulatory bodies, such as the US NFA/CFTC, UK FCA, Japan JFSA, and Australia ASIC.

However, traders need to be wary of unlicensed DD brokers or only licensed by unknown regulatory bodies. DD brokers with bad licenses (Bucket Shop) are known to be capable of engineering such as price requotes, stop loss hunting, and frequent server crashes.

Bucket Shop brokers are also likely to be absent from paying traders' withdrawals for various reasons. Starting from delaying payments for more than two weeks, cutting traders' profits, and so on.

At first, traders may be interested in signing up for a Bucket Shop broker because of the lure of tempting bonuses. However, in the end, the bonus gain may be lower than the losses faced due to broker manipulation.

Types of Forex Brokers without a Dealing Desk (NDD)

As the name implies, traders' orders that enter the NDD broker will not go to the broker's desk but are channeled to other parties. The NDD type of forex broker works as an intermediary between traders and the interbank market network where forex trading takes place.

NDD brokers usually don't place positions against traders, so their profits come primarily from mark-up spreads and trading commissions only. NDD brokers can be further classified into two types of forex brokers based on how they pass trader orders to other parties. 

The first is an STP Broker. This broker passes trader orders into the “liquidity pool”. This pool consists of financial institutions providing liquidity, such as international banks. Trader's orders will be executed based on the best available price position in the “liquidity pool”.

The second is ECN Brokers. This broker pass traders' orders to the network of international banks and other liquidity providers it has built so that traders' orders will be executed at the best prices that appear on the market.

At first glance, the two are similar. Best forex broker will provide transparency. All ECN traders can directly see the buy and sell positions of other market players (Depth of Market/DoM). Meanwhile, STP brokers cannot provide a DoM display.

Whatever type of broker you choose, make sure that the company is a regulated broker. This is important for trading security. Also, make sure you choose the types of forex brokers according to your trading goals.