Main types of foreign exchange trading modes
Background processing mode (DD) usually has traders or backstage to conduct foreign exchange transactions, and the spread is fixed. This model is also called the market maker model.
In NDD, there are no traders or backstage to conduct foreign exchange transactions. In this model, foreign exchange brokers play an intermediary role, earning spreads to maintain profits. No background processing mode is divided into two types of trading platforms.
STP (Straight-through Processing) foreign exchange platform is a straight-through foreign exchange platform. In this platform, customers' orders will be sent directly to foreign exchange brokers. Liquidity suppliers include banks or other brokers.
The spread quotation of relevant platforms is an average price based on all quotations. Because the price is always changing, the spread is a floating spread.
ECN (Electronic Communication Network) foreign exchange platform, electronic communication network and ECN foreign exchange trading platform allow customers to interact with other traders' orders. This platform has relative buyers and sellers, and each order will have an order corresponding to its operation.
Foreign exchange trading model profit model
STP (Straight-through Processing) foreign exchange platform: Obtain basic quotations from liquid suppliers and make profits by slightly increasing the spread.
ECN (Electronic Communication Network) foreign exchange platform: Earn commission instead of spread to make profit. Earn profits according to the commission share of customers' profits.
DD foreign exchange platform: spreads are only one of the means of profit, and hedging with customers can also be profitable.
abstract
Generally speaking, short-term traders who like day trading or scalping are suitable for finding a trading platform with low price difference, so that it is possible to expand their profit opportunities through day trading.
STP brokers have added a little difference to their liquid suppliers.
ECN brokers only make profits through commissions, not through spreads, and share the profit amount of customers in proportion.
Market makers profit by hedging with customers.