What is a STP Forex Broker?How to Recognize a Real One?
No Forex trader would like to know the fact that the company they trade with generates profit from the losses of their customers.
Even though there have been a large-scale cleaning and elimination among Forex companies, there are still many companies who adopted this model where they are having position against the trader’s positions which is known as BBook.
Unfortunately, despite the fact that the traders train themselves well and pick the right strategy, they give up on Forex and become a part of the loser’s club instead of making it a source of income due to the platform settings of companies working against the trader.
This is more like a brand-new sports car struggling to have a good performance on a rough asphalt.
However, there are trader friendly brokers where the trader can implement his strategy successfully. This type of brokerages transmits every order to the Liquidity Providers or Tier-1 Banks.
So, there is no such thing as working against the trader. If it is a STP company with a cutting-edge technological infrastructure, transactions would be handled super-fast and the risk of slippage would be minimized. As a result, you would see a substantial increase with your investment.
There are many brokers who claim to be a STP, but most of them have actually adopted BBook model and they use this only as a marketing tool.
If so, how can we find a real STP Broker? What are the positive signs of a good one?
Being transparent is essential. Representative of the broker should be able to reply to all questions without any hesitation.
There are signs to measure the level of the transparency within the broker.
Sharing Liquidity Providers
Broker should be able to clarify the execution venue of the requested transaction. If the broker is reluctant to share this information or claim that they cannot expose it due to company policies, more likely you are not trading with a STP broker.
What is a Liquidity Provider? Why Brokers Need Them?
Connecting to Tier-1 banks requires a complex technological infrastructure together with financial challenges.
Liquidity providers gather prices from Tier-1 banks and after blending these prices, they provide an aggregated price feed to the brokers.
Transaction Speed
It is possible to see the transaction speed from the journal section of MT4 and MT5. Companies with average transaction speed between 80 and 140 milliseconds are most likely a STP Broker.
The faster a transaction is sent to the market, the lower the slippage risk is. This is crucial for profitability.
Aggregation Mode
Brokers usually prefer to operate with more than one Liquidity Provider. Brokers have various execution methods. In my opinion, aggregation mode has the ability to respond to a wide range of strategies.
Order would always be executed from the best bid or ask price available at the very time of the execution which has a tremendous effect on the profitability.
OrderBook Summary
Broker should be able to provide the order book summary at the time of the execution. This is the absolute proof of a fair and transparent execution price which clearly shows that the particular order was executed in a bank from the best price available.
I shared the background of STP Brokers with you as much as I can based on the know how I have gathered for years.
If you want more insight details and trade with the best commission structure in a great broker, you can always message me or reach me via https://mssg.me/amirdeshilton.