The currency market has the daily average turnover of more than 5 trillion. There are many players in the market and it is important for every trader to understand all the dynamics of market. In this market you have the people like Mr. Buffet, companies like JP Morgan and the central banks/dealers/brokers, which have got the potential to imbalance the trades. And of course you’ve the traders whose numbers are swelling with every passing day. Have you ever wondered why many traders are losing money at the same time the big players are making magnificent profits? Here we’ll discuss the factors which are not known by many traders that affects the market.
Broker Types:
In Forex, we’ve got two types of brokers i.e. ECN broker and the market makers. ECNs are also known as NDD (Non Desk dealing) brokers. These brokers give direct access to market pricing as delivered by the providers. With them, what you see is what you get. Traders trade with same price which comes from the liquidity providers. Generally, there are various prices shown by the providers therefore traders have the option to choose the price best for him. The order placed directly goes to the market for execution. But it cost money to maintain the structure of this mechanism that’s why this comes at a premium. Forex spreads are not fixed and the commission is paid on trades using the platform. Due to the higher cost, these platforms are mostly used by institutional traders.
While market makers are dealing desk brokers. They serve as a liquidity bridge in Forex. The situation where traders cannot afford the requirement, which are norm in ECN, the market maker matches the trade volume with accompanying liquidity. They operate dealing desk that purchase orders from liquidity providers and resell the trades to the traders. They offer fixed spreads and don’t charge any commission. In case trader loses the trade, market maker will make money and when he wins, it will lose the money.
Order Flows
Did you ever hear about the Dark Pools? If not, then it is the system where big player of the market can trade large volume without suffering the effects of the fluctuation emerged as a result of large demands. With this pool the market depth and liquidity is hidden. Without accessing this information traders can never know whether the demand will shift or not while the members of the pools can plan their trades. These pools could either be broker mediated or independent.
Broker Types:
In Forex, we’ve got two types of brokers i.e. ECN broker and the market makers. ECNs are also known as NDD (Non Desk dealing) brokers. These brokers give direct access to market pricing as delivered by the providers. With them, what you see is what you get. Traders trade with same price which comes from the liquidity providers. Generally, there are various prices shown by the providers therefore traders have the option to choose the price best for him. The order placed directly goes to the market for execution. But it cost money to maintain the structure of this mechanism that’s why this comes at a premium. Forex spreads are not fixed and the commission is paid on trades using the platform. Due to the higher cost, these platforms are mostly used by institutional traders.
While market makers are dealing desk brokers. They serve as a liquidity bridge in Forex. The situation where traders cannot afford the requirement, which are norm in ECN, the market maker matches the trade volume with accompanying liquidity. They operate dealing desk that purchase orders from liquidity providers and resell the trades to the traders. They offer fixed spreads and don’t charge any commission. In case trader loses the trade, market maker will make money and when he wins, it will lose the money.
Order Flows
Did you ever hear about the Dark Pools? If not, then it is the system where big player of the market can trade large volume without suffering the effects of the fluctuation emerged as a result of large demands. With this pool the market depth and liquidity is hidden. Without accessing this information traders can never know whether the demand will shift or not while the members of the pools can plan their trades. These pools could either be broker mediated or independent.
No comments:
Post a Comment