True STP Forex Brokers
Have you ever noticed that most Forex brokers advertise their price spreads above all other factors? While this is an important factor to consider when trading, it's merely one piece of the puzzle that must be examined.
Certainly, a more important factor is the ability to execute trades at quoted prices around major market news events such as the monthly NFP report. As a trader who looks to profit from short-term price moves, you may not be able to execute your strategy whether manual or automated. One reason is the fact that a broker may act as the buyer of a Forex pair while you play the part of the seller. Sound like a mutually beneficial contract?
At its essence, this relationship pits the trader against the broker as one participant's interests are opposite of the other's. Simply stated, if your trade is profitable, the broker realizes a loss. Employing a Dealing Desk model isn't inherently evil (to put it jokingly). Some may argue that Dealing Desks provided a service for those individuals who traditionally didn't have access to the Forex market due to high barriers in the form of excessive charges and substantial deposit minimums. When Dealing Desks fail to perform their intended role of providing liquidity for retail Forex trades, the problem usually can be attributed to a breakdown in the firms'. Risk management guidelines and/or systems. If not properly managed, a Dealing Desk can become a huge liability for a broker if steps haven't been taken to offset excessive position risk. As a trader, are you willing to take this risk?