Dealing desk broker vs no dealing desk broker, what should choose? If the previous chapter, we studied the history of retail forex trading, and also touched on dealing desk brokers and no dealing desks.
I think your understanding is quite good about how the dealing desk broker works and the no dealing desk work. The next question that may come is, which broker is better to choose. Is it a dealing desk broker or no dealing desk broker? In the end, you will choose yourself according to your needs.
Here we will only talk about the advantages and disadvantages of each type of broker. And all your choices will also depend on your ability in forex trading. It’s useless for you to choose a no dealing desk broker but your skills often get a stop out account.
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Difference broker market maker, STP, and STP+ECN
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Basically, brokers are divided into two types, dealing desk brokers and no dealing desk brokers.
But because no dealing desk broker can be divided into two, STP broker and STP + ECN broker, in general, the type of broker is divided into three parts.
The first is the market maker broker, the second STP broker, and the third STP + ECN broker. At market maker brokers usually, offer fixed spreads. But they often take opposite positions to client orders, so if a trader gets a loss it will become a broker’s profit.
For traders who like low and fixed spreads. Choosing a market maker broker is a challenge, especially for those who like scalping. But sometimes market maker brokers have very strict rules forbidding certain strategies such as scalping or placing an order for less than five minutes then the profit will be revoked and so on.
Because basically, they want to always profit when going against a client’s order. Meanwhile, no dealing desk brokers. They have variable spreads, sometimes there can be a wider spread because the liquidity provider changes the quote.
But their no dealing desk broker does not against the client’s order position. And they only throw client orders at the liquidity provider, there is no dealing desk on their platform. So every time a client makes an order almost always takes place in a matter of milliseconds. And there are rare cases of requotes in the broker’s no dealing desk.
In the image below shows the differences between the three types of forex trading accounts, it might help you in determining the broker that should be the best choice.
Advantage of dealing desk brokers
Read also Trading with 100 dollars on forex or CFD
Is a dealing desk broker a scam? Actually all brokers want their clients to always actively trade using their platforms, because, without a client, the broker is nothing, both for dealing desk vs no dealing desk
Although they often go against client orders, basically it’s also quite risky.
Some of the advantages offered by dealing desk brokers include:
- They offer fixed spreads, so there is no widespread.
- Dealing desk broker offers free trading bonuses with certain conditions, it might not be easy to fill in all the bonus rules, but this way to attract more clients.
- They help traders by providing analysis from analyst brokers.
- Low minimum deposit as capital, even with 1 $ can start to trade because they dare to offer high leverage up to 1000: 1.
Broker Dealing Desk with very intensive promotional campaigns. Offering various kinds of tempting bonuses and prizes, this is a special attraction for traders. Free bonus promotions without a deposit are very interesting for beginners to try them.
If you want to use or choose a dealing desk broker. Then you should look at the broker’s reputation from the trader’s reviews and also pay attention to the broker’s regulations because dealing desk brokers do not mean broker scams.
Here are some tips for you who will choose a dealing desk broker.
- Choose a regulated Dealing Desk Broker that has been established for a long time (has a long-time experience).
- At least, the company is not a scam and if they cheat, then it is still in the corridor of rules that can be formulated, not too far.
- Limit deposits to under 10,000 US Dollars. Withdraw profits regularly. Don’t let the funds accumulate to a large amount, then just withdraw; in this condition, the possibility of the broker will be lost will be higher.
The disadvantage of dealing desk broker
Besides having advantages, the dealing desk also has disadvantages, as in many cases, there will be pros and cons when seeing a problem.
What are disadvantages in dealing desk brokers is as follows:
- The dealing desk broker generally defines many convoluted trading terms and conditions.
- Because the element of conflict of interest between the broker and the client is very high, the dealing desk broker makes rules that give the broker a “way out” not to fulfill his obligations as promised to the trader.
- On trading platforms, when you open a position or close a position, there will often be a slowdown, requote often, freeze, price manipulation, and so on.
- If you make a very high profit, there is a possibility that your account will be blocked, they like to cheat but you can’t cheat on them.
- You cannot see prices on the interbank market, because they monopolize prices
- The goal is to make traders easy to lose, but behind it so that people stay with him, usually Brokers Bandar provides lots of promotional lure and fantastic bonuses. For example, leverage up to 1: 1000 or more, Fixed Spread (not according to Market), a bonus deposit of several hundred percent, can be transferred via third parties, and others. The target is to make it easier for people to deposit funds to them.
Advantage of no dealing desk broker
In contrast to dealing desk brokers, in no dealing desk brokers, they only act as intermediaries between clients and liquidity providers. They work with several liquidity providers, and traders will get price quotation conditions according to those available to liquidity providers, not brokerage monopolies.
The advantages of trading with a no dealing desk broker are
- They work not against your order, whenever you make an order it will be forwarded to the liquidity provider and you will get the price of the quote.
- Because there is no conflict of interest, the order speed is only in milliseconds, it rarely happens to requote unless your internet speed is weak.
- Some of them set up trading contests to sharpen clients’ abilities with attractive prizes.
The dealing desk broker itself is divided into STP broker and ECN broker, but some brokers provide both for clients and can be said as hybrid brokers.
STP brokers can forward orders to other brokers, you might need to ask about the liquidity provider used because they might just forward the order to the dealing desk broker.
ECN brokers are much better because they only serve as a client bridge with the real market.
The disadvantage of no dealing desk broker
Besides the advantages of being a no dealing desk broker, they also have disadvantages, of course, this is natural in many cases there will be pros and cons.
Some of the disadvantages of a no dealing desk broker are:
- Variable spreads, which may occur when market conditions have high impact news that makes price movements very high volatile, you find widening spreads.
- Usually, they offer leverage only below 500: 1
- The minimum deposit is also greater than the dealing desk broker, this also depends on the broker’s policy, you need to check about this minimum deposit at your broker.
You might have found some answers about which broker should be chosen, if you decide to choose a no dealing desk broker, with an STP account for example, what you need to pay attention to is
- Prepare your first capital, according to the minimum deposit, but what’s more important is your preparation to start trading, this can be done with a demo account.
- You also need to check, your broker regulation, this is certainly very important because with this regulation they have the legality of establishing a company in their country.
- You may need several documents as a requirement to get your account verified, this is important for cash withdrawals from your account, usually, the broker will refuse withdrawals if the account is unverified.
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Brokers aren’t evil, they need clients
Basically, all brokers need clients, without them a broker is nothing both for dealing desk vs no dealing desk. Therefore the competition at this brokerage company is very high, they do many ways to make clients stay in the trade and continue to use their platform.
Sometimes there are even dishonest practices that they do to their competitors with the aim of giving the company a bad image so that clients will come to them. At dealing desk brokers, what they do with high bonus campaigns, giving bonus rewards to forum posts, is a way to retain their clients.
All brokers apply various marketing strategies. While those who get good reviews from traders will be able to compete in this business. So don’t think that brokers are evil because they always want to be with you and do business with you.
But indeed you need to carefully choose your broker. Because like as we said before, not all broker is good, some of them being a scammer.
Dealing desk vs no dealing desk broker is a brokerage company with the aim of getting profit. They have the advantages and disadvantages of each. But by understanding how they work. At least this provides a reference when you start spending your first capital.
Regardless of which broker you choose, what needs to be understood is the preparation of your ability to manage capital in the forex market. You must be sure and be ready to accept all the consequences in trading because maybe you will get a failure or lose some of your money.
Because forex trading is a type of risky investment. The golden rules of investing money in risky business must be obeyed, just spent money that affords to lose.
In this chapter, we have discussed the dealing desk and no dealing desk broker. then we will learn about the spread in the next chapter.
Are you ready to start trading?