Analysis of the Five Types of Forex Brokers

Trading Strategy

There are variable kinds of Brokers, but in total, there exists five types. These five types of Forex brokers have access to brokerage firms that are recognized and considered legitimate versus those shady backdoor brokers who cannot provide you any guarantees. If you want to succeed in getting the right broker, I suggest reviewing their policies. They have similar access to the Forex market, but their terms and conditions might make you choose one type of broker over another.

The Forex trading market is not heavily regulated, which means that shady backdoor deals are probably rampant. The result is that you may be easily scammed into believing that your investments are being managed appropriately. Beginners should take careful consideration who their brokers will be and whether they have legitimate certificates.

Forex brokers come at varying types and similarly have variable influence and direct access to the Forex market. The closer to the Forex market, the better your investments and vice versa for those distant from the market. Different types of traders have different needs and security. Choose wisely among these types:

1) Bucket shops: these types of brokers have practically no relationship and access to the Forex market and likewise depend significantly on futures currencies and similar options. Upon completion of their analysis of retail traders, these types of brokers will decide on “booking” their opposite position without even executing their decisions. These bucket shops play only devils advocates without actually doing anything and so their legality is easily questionable. This is one of those “brokers” that beginners must avoid at all costs.

2) Book maker: these individuals are kind of similar to bucket shop “brokers”, however, they have to win the bet before they can earn anything from their efforts. Their profit is determined by the “spread” of the investment (i.e. the result from the buying and selling price). These “brokers” don’t have an immediate connection to the Forex market, and so their reassurances can’t be guaranteed. Their estimations may be attractive, but they cannot be considered legitimate if they do not have immediate and direct access to the Forex market. These “brokers” are also referred to as “spread betters”.

3) Retail Market Maker: these are the most frequent types of Forex “brokers”. They have extensive connections and thereby a slight access to the Forex market. They have information coming from several sources that provide relatively useful advice. Furthermore, they have several services that may prove useful. These are the predominant types of brokers that beginning traders go to and have a legal existence in the US.

4) Institutional Market Maker: these brokers have a high confidence relationship with the Forex market and thereby have information that may be pertinent to traders. They also have strong ties with retail market brokers. They are very costly since they have strong direct ties t the Interbank Markets. You should approach these with much confidence nevertheless.

5) Institutional Forex: these are individuals with direct relations to the market and with very reliable and strong evidentiary information that will give your investments strong promise. They are a combination of two hundred banks that accounts for more than half of all Forex trading (since more than half is based on the USD currency). This is the realm of banks and no regular broker ever has access to this type of facility. If they say they do, they are lying, I assure you.

With these types of brokers in clear sight, choose the ones representing your best interests and security level. Careful of the backdoor trading schemes and scam artists determined to persuade you in any way possible to get their money. Good luck!

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