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Best Forex Broker For Beginners
Do you want to know the best forex broker for beginners?
It’s not an easy choice.
There are dealing desk (market makers) and non-dealing desk forex brokers.
Most traders prefer non-dealing forex brokers, since they tend to have tighter spreads. Despite this fact, market makers are still widely popular due to their many product offerings, outside price.
In the forex game, while most beginner traders are concerned about price, you shouldn’t only be concerned with broker pricing.
There are other things to consider when choosing your broker, such as technology, customer service and execution.
The list goes on…
Best Forex Broker For Beginners: Non-dealing desk forex brokers
There are three types of non-dealing desk forex brokers:
- Direct Market Access (DMA)
- Electronic Communication Network (ECN)
- Straight-Through Processing (STP)
The main difference between the brokers is routing.
DMA and STP brokers make individual contracts with different liquidity providers, such as investment banks. With DMA and STP brokers, forex traders can buy and sell directly with leading banks and market markers.
ECN brokers connect directly to a massive liquidity pool. With ECN brokers, you aren’t trading directly with banks and market makers. You’re trading against all forex market participants, such as banks, market makers and retail traders.
ECN brokers are the most popular.
Some traders say that they are the best forex broker for beginners. (But not always).
ECN brokers will send your order directly to the market and guarantee you competitive pricing. That said, all three broker models are pretty much the same, since your broker isn’t taking the other side of your trade (i.e. market maker). Therefore they all eliminate the fear that your broker is trading against you.
Forex traders receive fast execution and can see real-time prices under all three models, which allows for excellent transparency.
Best Forex Broker For Beginners: Dealing desk forex brokers
Now, what are market makers and should you trade with them?
Market makers are very different to non-dealing brokers because they take the other side of your trade. For example, imagine you are entering a long position in a currency pair. The market maker would create a ‘market’ for the currency pair and take the other side of the trade (i.e. short position).
In short, if you win, the market marker loses and vice versa if you lose.
Market markets offer fast execution since they’re taking the other side of the trade.
The market makers can see every trader’s limit orders and stop–losses in the market. For example, if you could see a large group of forex traders with similar stop–losses (normally around round numbers, such as 75 or 80 cents), what would you do?
You would probably stop them out of their positions.
That’s why market makers tend to have a bad reputation in the forex industry.
However, not all are bad!
The best things about market makers…
The market makers have become a lot more competitive due to increased competition in recent years ― especially with non-dealing desk brokers stealing clients. That said, some market makers still have a bad reputation.
But most corrupt brokers are quickly going out of business…
I have friends who only trade with market makers! They prefer their technology, which offers a better user experience than that offered by non-dealing desk brokers.
You shouldn’t write off market makers, especially if you’re learning how to trade forex.
Market makers have more product offerings than non-dealing desk brokers, for example.
If you want to trade exotic currency pairs, agriculture products or a wider scope of metals (i.e. platinum or copper), you should trade with a market maker.
Market makers also offer more flexibility, such as trading smaller positions.
In my experience, high-reputation market makers have just as good spreads and commissions as non-dealing market makers. But you’ll definitively get more competitive costing from non-dealing desk brokers because the market maker isn’t taking the other side of the trade. Then again, as mentioned many times, as a forex trader you shouldn’t only be concerned with price.
Your ‘Start With Forex’ takeaway: Best Forex Broker For Beginners
Most beginner forex traders are only concerned with price.
It’s a big mistake.
You should also consider execution, technology, customer service, and what products you want to trade.
Ultimately, the broker choice is yours and yours alone.
Each forex trader is different.
Market makers tend to offer better trading platforms and customer service, and more products. In addition, reputable market makers offer good execution and competitive pricing. Non-dealing desk brokers also offer excellent execution and competitive pricing. But, above all, their technology and customer service is also pretty good.
It’s a tough choice.
You need to research and experiment with multiple brokers to see who you like the most.
Most brokers will offer completive prices these days. They mostly differ on technology, customer service and execution.
When we get this site up and running, I’ll expand on this section and recommend the best forex broker for beginners (market makers and non-dealing desks). I also intend to be an affiliate of these reputable brokers to get your more competitive spreads and commissions in the future.
If you have any questions on brokers, I’m happy to answer them in the comments section below.
Hopefully you’re becoming a more confident forex trader. But we still have so much more to cover in this course. In the next short lesson, we’ll dive into whether forex trading is legal, the biggest forex broker scams, and how to avoid them. To read the next lesson, click here.
To your trading success,
Start With Forex
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