There are lots of brokers out there, which means that finding the right one can help you a lot. You should consider focusing on how the brokerage business is organized, instead of thinking about things like commissions, reputations and spreads. A lot of people tend to focus on working with STP Forex brokers nowadays, but why does that happen?
The STP broker is a straight through processing broker, and this means that he will pass a portion of the client trade or maybe all of that to liquidity providers to execute it. This is a great form to organize the business, and it allows the broker to show the market in a clear manner.
Less work to deal with
When you use STP Forex brokers, you get to deal with fewer risks, because the STP model is created with a hands-off approach. The order will get passed directly from the trader to the liquidity provider. There’s less work for the broker, and you still get to eliminate the pressure of dealing with this yourself. It’s a great approach and one that can help you and the broker get the results you want.
The STP model offers a much better revenue forecasting
The broker gains the quotes, and he executes the client position via the liquidity provider. The STP model allows you to mark up the rates offered by the liquidity provider. The broker gets revenue from each trade, and that revenue is easy to identify. So, you get to know your revenue too, which leads to a much more comprehensive revenue forecasting experience that works well in the long term.
The market conditions are not as relevant
Usually, the broker must be at the whim of the market, and this means that the market makers can do a lot better when volatility appears in the trading world. The benefit that comes from the STP model here is that the revenue is constant even if the market conditions are drastically changed. Sure, there will be some volatility at times, but nothing will make the STP model work any less.
Clients have a great experience
The trading patterns can lead to instability if you use regular Forex trading, but the benefit that comes from STP methods is that clients always get to have a lot better results. Moreover, the STP brokers can deal with a large work volume, and this leads to a lot of impressive experiences in the long run. Then you have the fact that there are fewer headaches to deal with. The unexpected challenges that can appear will not be making that huge of an impact right off the bat. If the traders execute orders adequately, then results are great.
Yes, STP trading does come with its own set of challenges, but in the end, it can lead to some rather rewarding results. As long as you want trades to go smoothly, opting for the STP brokers can be a really good idea and a stellar investment that can pay off extremely well in the end.
Written by Triomarkets, an ECN/STP Forex broker.
This article represents the views of the author and not necessarily the opinion of ForexTraders.com