A forex broker refers to an agent who acts as a link between buyers and sellers in the forex market. Most brokers in the forex market have large banks that provide them with market prices of various currencies which are then transferred to traders in the form of ask or bid prices. To know and identify the best forex brokers in South Africa, it is good to first know the different types of brokers in the market.
It may also be important that you hire or consult a well-established forex company to guide you in trading. Because of ever-increasing technology, online forex trading is very common and you can make or lose money trading on the internet and the worst part is you can be cheated so be cautious.
Market makers have what are known as dealing desks in the forex markets and that is why they are abbreviated as DDs. Most of the traders are of the view that these brokers do not have their interests at heart because as the name suggests, they (these brokers) create markets only for forex traders.
For traders who want to sell, DD brokers buy from them; For traders who want to buy, these brokers sell them. These brokers make money by favoring their clients and not trading through spreads. They are never on the same side of trading with brokers as their main purpose of brokerage is to create a market for forex traders.
STP brokers send client orders directly to liquidity providers which are usually banks that participate in interbank trading. Sometimes STP brokers have only one provider for liquidity while at other times, they may have several.
An increase in the number of banks and liquidity in the system means better and more profitable trading for the brokers. Traders can access the market and trade without these brokers. These brokers are preferred by most forex traders because of their transparency and honesty in trading.