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Now let’s come back and touch base on our forex curriculum guide. We’ll still side track a little on how to trade, and focus a little on how to pick your choice of forex broker. First before identifying your type of broker, we’ll learn on pips spread.

What is Pips Spread?

Spread is usually forex brokers main source of income. Before you place an order on either a buy or sell position on a particular currency pair, they will present you with two prices, one bid and one ask price, where the difference is known as pip spread. Let’s take a look with our Meta Trader demo again now.

I clicked on Order on GBPUSD. Look at the circle, on the bid and ask price. The bid price is the one that’s moving up and down on the market, the ask is what the broker is asking for. Notice the difference in bid and asking price.. you get that? AHA! Yes, that’s the pips spread, and that’s what brokers earn.. USUALLY. Read on.

There are mainly two types of brokers in the market, namely the Retail brokers and the ECN brokers.

Retail Brokers

These are the modern day bucket shops that usually work against you and profits when you lose money. These market makers allow you to open accounts with very minimal money, use insane leverages, lets you use micro and mini lots and allows you to demo with their trading platform for practices.

ECN Brokers

ECN brokers usually protects clients interest. Usually most of the time they won’t do requotes or even cancel your order after being placed. The Ask and Bid prices are not fixed and spreads sometimes can even be zero. Commissions are usually fixed, usually at only half a pip.

Your funds are usually seperated when you place the deposit onto a bank account and the broker will not use the funds for their expenses. In case anything happens to the broker, your funds will still be in your bank account, safe.

The only drawback is that the minimum sum to join an ECN broker is usually high (10,000.00 USD and above)

Which is better for you?

If you have at least 20 - 30k to spare for trading, ECN brokers is best since they can protect your interest and money. But if you just started with forex and have little to spare in this case, depositing and starting with a Retail broker is not a bad idea till you are confident to switch to an ECN.

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