1. STP Broker– STP brokers or Straight Through Processing brokers, is the name given to brokers that when upon receipt of a client order, will pass on the orders directly to their liquidity provider.
2. ECN Broker– Electronic communications network model-An ECN broker uses electronic communications networks (ECNs) to provide traders direct access to other market participants in currency markets.
3. DMA Broker – Direct market access model
4. MM Broker– Market maker model- A market maker is a broker that is willing and ready to buy and sell securities for a profitable price.
5. P2P Broker – Peer to Peer model
The STP/ECN and DMA Brokerage models are the TYPICAL brokerage models that post all your trade orders to the managers of the regular market. The managers of the common market are named the Market Makers.
The market makers are your counterparties when trading CFDs.
So if you gain, they suffer. In the similar line of thinking, in the event you perpetually earn, it implies that the provider is losing and vice versa.
The market makers own the authority to reject your trade flows. This factor is ultimately a critical element. You can trade with a provider that is operating an STP/ECN/DMA model and still have your trading gains canceled or in an even worse event; your deposit might be held back temporally. This type of unethical action of an STP broker may happen to be because their Market Makerterminated your orders at some intention and therefore, whatever profits you earned becomes invalid. The market maker may besides prefer to penalize the Broker for allowing such streams by retaining your funds.
Trading CFDs and FX