If you are new to Forex trading, you will most likely do business with a broker. This is a straightforward arrangement and is the most prevalent. The Forex dealing desk refers to the actual traders that are working for the broker and who manage your account. This is the process used at most traditional brokerages and is generally a safe form of trading. The problem with it is two-fold, the cost of the trades and the speed of trading.
Give Me the Usual Please
For most investors, even in the world of Forex dealing, the traditional system of brokerage is the one most often used. The brokerage is profiting from the 
gains earned on their trading activities and they are generally motivated to insure that their clients are successful in order to earn profit themselves, which is the usual arrangement. There is a degree of safety inherent in this system that comes from the fact that if they showed an inconsistent record of gain, it would make them unattractive to potential investors. It is therefore somewhat less likely that the individual or amateur investor would lose money.
The reason for some seeking other avenues of investment is that the potential gain is reduced as well. Most Forex dealing desk brokerages will charge fees that are keyed to the spreads in the currency-pairs and they can, and often do, increase them without warning in order to increase their earnings. This will, of course, reduce the profit to the investor.
Forex No-Dealing Desk Option
The other major limitation in the traditional Forex brokerage model is time. In currency trading, time is a critical factor. Currency-pairs will often fluctuate very rapidly and as a result, traders will be in a position requiring them to execute trades in a matter of seconds to realize any real gains. With the Forex dealing desk, this is limited, as the traders working the dealing desk cannot move that fast.
This has led to the phenomenon of the Forex no-dealing desk. This type of brokerage allows for the operation of Forex robots or automated trading systems. The purpose of these systems is to allow the trader to execute trades instantaneously on their own, trading directly on-exchange against banks, FCM’s, and Institutional investors.
The No-Dealing Advantage
The big advantage is that you are free to trade in your own way. Further, the cost of trading is lower. Most Forex no-dealing desk brokers charge a flat commission structure and provide a schedule of fees upfront. The lower cost coupled with the ability to trade in nearly real-time has made this a popular option in recent years.
There are greater risks however, if you are inexperienced or lacking in information you can find yourself losing money very fast. These systems are favored among experienced day-traders for these reasons but should be viewed with caution by the novice trader.
Types of Forex Brokers
- Market makers that are “bucket shops.” These not only trade against their clients, but they don’t really execute an order on a foreign exchange. They just bet against the trader. You should avoid these brokers at all costs. Similar to bucket shops are “book makers” that accumulate profits through fluctuating the spread prices to earn fees.
- Retail market makers are legal in most countries and vary widely in their services and in their reputations. Some have a direct connection to the actually Forex market, while others are only intermediaries.
- Institutional market makers have direct access to the foreign exchange markets and are usually very reputable. Sometimes they require a large capitalization of of the Forex account before you can trade.
- Institutional Forex brokers are usually large banks directly connected to the Forex market. Only banks have direct access to the Interbank market for trading.
- Electronic Communications Network (ECN) allow traders the opportunity to post their own Bid and Ask prices. Because of this, the potential for better fills and improved transparency of order execution is advantageous to Forex traders. The downside to ECN brokers is that they often do not provide good charting and Forex indicators tools. ECN’s do not have a dealing desk, which refers to the way some brokers intercept orders placed by the traders to possibly either trade against the order or fluctuate the spread to increase their commissions.