Another thing to look out for in your potential broker is whether they have a dealing desk or not.
A dealing desk is simply a feature through which your order passes through before being transferd to the market. This means that the broker actually processes each order that you place.
The fact that the broker stands in between you and the inter bank market place is the reason that they can offer fixed spreads, they in effect manipulate the prices to keep them constant. On a traditional non-dealing desk broker the prices of each currency would almost never remain constant or fixed because they are constantly streaming live prices provided by several banks at any given time.
This means that there are many times during a day when the spread on some of the more popular pairs is 0 pips. So for the broker to make money from providing the service that they do, they need to charge commissions. Many traders believe these commission charges to be expensive, and that brokers that offer “No commission charges” are the best way to go, however these brokers can only do this by keeping the spread fixed AKA manipulating the price feed, which of course is not the kind of environment that is ideal for free inter-market trading.
So what kind of brokers allow you to trade without a dealing desk? and how can you find such a broker?
Well the answer is in the type of broker that you choose, for example brokers that have no dealing desks are commonly known as ECN brokers, and i will be going into much more detail on these in my next blog, so stay tuned!
