There was a time when forex trading was very much beyond the reach of the average man in Australia. These were times when the Australian forex market was dominated by banks, large financial institutions, and high worth individuals. However, the arrival of forex brokers lead to the rise of the retail forex trader.
For a long time, the Australian retail forex market largely consisted of forex traders and forex brokers in the mould of market makers. However, the recent years have seen the rise of three other types of Australian forex brokers.
These are the Straight Through Processing brokers, the Electronic Communication Network brokers, and the hybrid brokers. Here is some information on these types.
Straight Through Processing Brokers
Straight Through Processing types of Australian forex brokers are also known as STP brokers. These brokers are also non dealing types of forex brokers who take the traders’ orders and process them straight through to liquidity providers. Therefore, the trader’s order is taken up by the liquidity provider and the broker is only involved as a middleman in the transaction.
Electronic Communication Network Brokers
Electronic Communication Network brokers are also known as ECN brokers and they are not very different from the STP type of Australian fx brokers. The biggest difference between ECN brokers and STP brokers is that while orders with the latter go to liquidity providers, orders with the former are transferred to anonymous liquidity pools.
Hybrid Australian Forex Brokers
Most traders know everything about the market maker type of Australian forex broker and have even worked with them for a considerable amount of time. However, because of increasing awareness and wariness amongst forex traders, most of these Australian forex brokers are moving towards a hybrid system.
A hybrid forex broker can be a combination of either ECN and market maker type or STP and market maker type. There are many reasons why most Australian fx brokers are moving towards this kind of a hybrid system.
The most obvious reason is that they do not want to give up the convenience and profits that they get by being market makers and still want to attract new traders.
Choosing From These Options
Making a choice from these three different types of Australian forex brokers can be difficult because all of them have their pros and cons. Therefore, which variant you choose depends entirely on which type suits your preferences and needs the most.
For instance, while there is some certainty that ECN Australian fx brokers will give natural market driven spreads, hybrid type of brokers can often turn out to be much cheaper than others.
Other Things To Consider
There are many other things that you should consider while choosing from the wide variety of Australian forex brokers that are active in the market. Everything from licences, leverage limits, and margin calls to platform interface, technical tools, and deposit policies must be considered if you are to end up with a broker who is going to improve your profit making abilities.
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