Not all forex brokers are evil. Yes, I know it might come as a shock to you if you’ve been digging around the multitude of reviews online.
No, the best forex brokers, and Australian regulated, ECN forex broker Vantage FX comes under this category, are really not out to get you. Ask yourself the following question. Why would a company that wants to do business with you, want to put you out of business? Wouldn’t it be much more beneficial for them to want you to be successful so you will keep coming back to them with more business?
It’s this premise that sets the best forex brokers apart from the rest. A premise that is based on which business model the forex broker in question chooses to run.
ECN Forex Brokers
Trading with an ECN forex broker such as Vantage FX means that your interests are aligned with those of your broker. An ECN forex broker passes your order through to liquidity providers or the interbank market, meaning your trades are actually being matched with other traders in the real market. They make money on the spread, meaning that they want active, profitable traders that will keep coming back for more.
ECN forex brokers aggregate a list of all the best bid and ask prices from liquidity providers (usually major banks and financial institutions) and match trades with the best possible prices and lowest possible spreads without considering the source. An ECN forex broker can be seen as a middle man between buyers and sellers with no interest in manipulating prices.
Market Maker Forex Brokers
On the other hand, if your broker is a Market Maker, your interests are NOT aligned with those of your broker. A market maker is essentially a bookie taking the opposite side of your trades. You are trading against them. When you open a position, they are the counterparty to your trade. Market makers want losers. They want you to lose so they can pocket your account!
Think of a market maker as overlaying their own market on top of the real market. Your orders never actually reach the real market and you are only taking bets on an overlay that the market maker has provided for you. This is where price manipulation and stop hunting can and does occur.
Make the smart choice as a forex trader and choose one of the best forex brokers with your interests aligned with theirs. You have enough enemies in the market already, you don’t need your forex broker to be another.
Source: Vantage FX Blog