If you’re just starting out in trading, choosing the right broker can be confusing. Some people swear by NDD (ECN/STP) brokers because of their transparency and direct market access, while others say Market Makers are better for beginners since they offer fixed spreads and no commission.
If you’re already trading, which type did you start with? Would you recommend it to a beginner, or would you choose differently if you had to start over?
Please understand that your answer might help a at least a couple of fellow traders, Thanks.
Your question is based on a misunderstanding. No criticism at all, there - it’s a very widespread misunderstanding and one that’s continually reinforced by online retail forex-trading misinformation, in PDF’s, forums, Youtube videos, and on some other so-called “educational” websites.
The reality is that they’re all market-makers, whether they’re called “NDD” or “STP” or “ECN” or “DMA” or not.
Reading these posts/threads carefully will help you (a lot!):
I doubt it. It rarely does. Almost everyone wants to continue to believe the myth that they’ve been brought up to believe, i.e. that NDD/STP/ECN brokers and market makers are two completely different animals.
They’re just not.
The ones who call themselves NDD/STP/ECN want everyone to continue to believe that they are, though.
Unfortunately all these terms “NDD”, “STP” and “ECN” are too short to be used with the forum’s search function, which is a real shame, because there are a lot of great threads here in which the position’s explained really clearly. And that’s certainly not equally true of most forums.
The important concept to appreciate is that even if retail forex “trades” are passed straight on to a liquidity provider, that liquidity provider will be either (a) owned by the “broker” or (b) it will be some kind of market-maker business essentially very similar to a market-maker broker and in some kind of close partnership with them anyway. So it’s all the same thing, really.
People are sometimes very resistant to understanding this, and they don’t want it to be true. But - as everyone who has ever actually worked in the industry will confirm - it is true.
I made the usual mistake of starting with one offering high leverage, stupidly believing that that would be an advantage. It wasn’t, obviously. They’re (by definition) not properly regulated.
Good question.
I’d choose differently, and just go with a properly regulated, lower leverage one, not caring whether it calls itself “ECN” or “NDD” or not. I think Oanda is ok. They’re pretty honest, as retail forex-brokers go. They’re even honest enough to admit - in the fine print - that they’re acting as counterparties. Being so well regulated, they’re not allowed NOT to say that on their website, of course. And being so well regulated, their websites are inspected regularly by real regulators who will close them down if they tell blatant lies on it, or deceive people. That’s actually rather more important and helpful to customers, wouldn’t you say?
well Thanks for your complete explanation Theodore, but the thing is I used a broker which I do not wish to name, and some candles happened to have a long shadow, and when I checked on other platforms that wasn’t it, so I figured out that this is called “shadow manipulation”, which I think is really unsecure tbh, how can I prevent that?
I have two brokers i use IG but be warned
their plarform is so brilliant it will become addictive!
The other broker I use (as recommended by the high stakes trader Tom Hougaard) is off-shore TD365, Though Bahamas based they are well regulated and hold clients funds in escrow with Barclays Bank London, hate their platform though. They are useful for adding to winning trades and have very low ‘fixed spreads’ otherwise I’m going in full clip with IG
Of course, if you are rich enough LMax are the big boys as a lot of brokers get their feeds off LMax but I think their minimum deposit is $50,000
Don’t imagine that you can avoid them by using a NDD broker rather than a counterparty. That isn’t how the industry works.
For a retail spot-forex/CFD trader, there will be a counterparty market maker involved, whether it’s in law the same company as the one who directly holds your account or not.
The only way you can avoid that is to trade in a real market in which all brokers have the same prices at the same times (e.g. forex futures rather than CFDs).
(You can, it’s true, reduce the risk of that happening to some extent by not using the Metatrader 4 platform, as well. But maybe you’re not using that anyway?)
Regardless of all that, it may be, of course, that your broker is an awful one, or worse than its competitors, anyway. We can’t give any opinion on that, without knowing which it is, and even then we might not be able to, and even if we could it would only be opinion anyway, not fact - and therefore maybe of pretty limited value to you.
For what it’s worth, if a broker is regulated by CFTC (USA), NFA (USA), FCA (UK), ASIC (Australia) or any European Union regulator, and if it says on its website that it’s not a counterparty, then you can be pretty sure that it’s genuinely not a counterparty.
For what that’s worth.
Which is very, very little because it’s not actually what matters.
Even if it’s not a marketmaker, then its liquidity provider partner is a marketmaker (even if the broker doesn’t own it, themselves) and from the customer’s perspective, in all the ways that are relevant, that the same thing.
As Theodore explained.
I appreciate that it’s what matters to you, right now - but that’s because your current impressions of what’s important are based on something of a misunderstanding. Again, please appreciate that I’m trying to help you, not in any way to be critical of you or dismissive of your question, which is a very, very common one.
And by the way, welcome to the forum. I just realised that this thread was your first post here. It’s a great place, but you still need to take care (as anywhere in life, and perhaps especially online?) by whom you choose to be guided.
Edit: sorry, I was typing my reply while Theodore posted above and had not seen his response to you when I said this. But I’m not really disagreeing with him anyway. And the suggestions above from @Johnny1974 might also be helpful to you?
For an intermediate trader, an NDD (No Dealing Desk) broker is generally better as it offers direct market access, tighter spreads, and faster execution without conflicts of interest. Market makers may introduce potential requotes or slippage, though they can be suitable for beginners due to fixed spreads. Choose based on your trading style and need for transparency.
The entire thread, above your post, has pointed out that this ISN’T right at all. It’s just what many people (including you, apparently) believe. How can you have been here for 10 years and still not understand this?!
It will help you to click the link below and read the whole page, including the bit that explains that if youre a retail forex trader, your “broker” is actually your counterparty and that there are no exceptions to this.
Some people are inexperienced enough, even after years, to believe that currencies actually change hands, somewhere along the line, when they trade forex.
I hope I offend nobody, but it’s honestly not easy to comment on this subject without risking sounding patronising or condescending. The truth is that many retail forex traders don’t know that either their broker or its liquidity provider - often owned by the broker, as mentioned above - is actually their counterparty and not really a broker at all.
They see all those industry terms (NDD, DMA, STP, ECN, etc.), and know what the letters stand for, and expect them to mean something. Which they really don’t. Specifically, people wrongly imagine, exactly as the brokers want them to imagine, that they’re trading through a real broker and that their trades are passed to a real market. Hence Ontario’s (mistaken) comment, above.
In this context, teaching people anything that can realistically help them involves first explaining to them that their existing beliefs are totally mistaken. People really dislike being told this, especially about things they’ve believed for a long time. As they see it, everyone else believes they’re trading currencies through a broker, too, so “how could it possibly not be true?”. At Babypips, it ought not to be quite so bad, because one can simply give people a link to the relevant lesson, as you kindly did just above.
