This is a trick question. You see, there are two layers of forex brokers. However, most people entering only see one of the layers.
The layer most people see are the market makers (another name for them is "bucketshops"). These brokers advertise heavily. They offer free charting packages. These are the ones you think of when you think forex brokers.
But there is another kind of forex broker. The are the ECN (electronic communication networks). These brokers don't advertise as heavily. They (usually) don't offer charting packages. They are sort of hidden.
Why are these ECN brokers important to know about? Let me explain. Market maker brokers (like the ones that advertise heavily) actually trade against you.
Yes, that's right. They "make the market." They take the opposite side of you order. They also know exactly where your stops are.
Wonderful . . .
Guess what happens next. That's right. They start sniping your stops. Little by little they drain your account. How did you think they afford all the advertising and free charting packages? Well . . . now you know.
On the other hand ECN brokers offer very small spreads (usually round 1 pip) pulse a small commission (usually about 0.5 of a pip). The commission is how they make their money. You become the market maker. They just match your order with another order. ECN's don't trade against you.
You can scalp, trade the news, whatever. They don't care. They let you make the market however you want. The real future of forex brokers is the ECNs.
Do you want to learn more about how I trade? I have just completed my brand new guide, "Forex Trading - What Finally Worked For Me".
Download it free here: Forex Trading
Nathan Pennington is a forex trader and the author of Winning Forex Trading -THE Definitive Guide
Source: www.isnare.com
