Before delving into the many issues of forex brokers today it would be best we define what a broker is before really jumping in. In simple terms a broker could be referred to as a go between, a middleman and or an agent. Now in the case of the forex market they are regarded as the agent responsible for linking the buyer and the seller to the market place. Since many big and successful forex brokers have big banks that provide them (the brokers) market prices, these market prices are transferred to traders as the bid/ask price.
To fully understand these brokers, one would really have to consider knowing the different types of brokers available. There are just four types of brokers but other school of thought may think differently. These are:
1) Market Makers/DD
2) NDD
3) STP
4) ECN
These are the four available types of brokers today (though I personally like to think there are just three).
1) Market Makers/DD: These brokers are to say the least not looking for your best interest as they have "dealing desks" (DD). Forex brokers that operate (route orders) through the Dealing Desk and quote fixed spreads. A dealing desk broker makes money via spreads and by trading against its clients. A Dealing Desk Forex broker is called a Market Maker - they literally "make the market" for traders: when traders want to sell, they buy from them, when traders want to buy, they sell to them, e.g. they will always take the opposite side of the trade and in this way "create the market". A trader doesn't see the real market quotes, which allows Dealing Desk brokers (Market Makers) manipulate with their quotes where they need to in order to fill the client. They make money from the bid/ask price which more often than not is manipulated. In my books this makes the market makers a "no no" for any trader who wants to succeed. Painfully most of your "micro accounts" are owned by these market makers. This is so because they may not have liquidity providers and since micro accounts do not require large sums of money they are willing to give traders a hard time. So if a trader must have a winning spree, such trader would want to avoid trading the news hours since the "market maker" brokers will be able to manipulate the prices as they so wish.
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