How FX Brokers Can Choose the Best LPs to Use

Technology has advanced so quickly that desktop computers are no longer superior to laptops. To accomplish these traders need a laptop capable of intensive online surfing and running charting software correctly. With technology constantly changing and evolving, traders have a choice between hundreds of laptops that could be perfect for their trading. Given that measuring the quality of an LP is more of a science than art, it is imperative that brokers and LPs look beyond spreads. The other metrics listed in the table above are equally important when brokers evaluate the quality of their LPs.

While a market making LP will quote their broker clients on what the market displays and trades are either booked internally or sent out to the market. And just like in FX, the market making (MM) can be the counterparty to a cryptocurrency transaction. Many liquidity providers have different NOP Limits during the workweek and different ones for positions left over the weekend.

  • Although over-the-counter Forex trading is available 24/7, the active trading on the Forex market occurs from Monday to Friday, resulting in a gap for various market assets.
  • This is a well-designed platform with a solid range of technical indicators and customization options.
  • Now that the risk transfer process has been explained, let’s add in more details and see how A-Book brokers actually make money.
  • However, in the case of significant expected volatility, such as during the US elections or an important FED meeting, liquidity providers may temporarily lower NOP limits.
  • When considering a liquidity provider, it is important to ensure that they have access to the most cutting-edge technologies so as to guarantee smooth execution of trading processes and optimal customer service.

Elsa ended up with a profit of 98 pips, which means her counterparty, the broker, ended up with an equivalent loss. This is where a broker adds an extra amount to the pricing for its customers. The examples were shown this way to keep the focus on how the broker offloaded its market risk. Forex trading — effectively, pitting one economy against another to increase the value of the currency that is purchased — has existed for decades. The dynamics that drive currency supply and demand are enormous, and any substantial imbalances may have a profound effect on the global economy. The ASUS VivoBook 15’s dual-storage architecture offers the best of both worlds, with the scorching data transfer rates of a 256GB SSD and the enormous storage capacity of a 1TB HDD.

Traders should therefore be aware of the potential for slippage and prepare accordingly. Aside from currencies, look for a broker that offers access to commodities, indices, shares, and cryptocurrencies. Many brokers offer different account types that suit different styles of trading and come with different fee structures. While there’s no one right way to start forex trading, there are common paths that many traders follow. Volatile market conditions provide the perfect opportunities for price manipulation and “stop hunting”, where a broker closes a trader’s position to make a profit for itself.

What is CFD Liquidity and where to find it?

PoP providers have prime broker (PB) relationships with major banks which give them the ability to aggregate prices from multiple LPs and distribute them to smaller forex brokers. When multiple liquidity providers stream their bid and ask prices, the broker’s “price engine” selects the best bid and ask price, which results in the best available spread. Although over-the-counter Forex trading is available 24/7, the active trading on the Forex market occurs from Monday to Friday, resulting in a gap for various market assets. A gap occurs in situations when a lot of pending orders accumulate, which are executed by brokers only on business days, creating an imbalance in liquidity.

But if it doesn’t, then the price is slipped and requoted with another price that favors the broker. “Slippage” refers to instances where the price at which the order is executed differs from the price quoted (for a market order) or the price requested (for stop-loss or take-profit orders). Examples of electronic market makers that are active in the FX markets are XTX Markets, Citadel Securities, Virtu Financial, Global Trading Systems, HC Technologies, and Jump Trading.

For our list of best currency trading brokers, we considered only those that are regulated by the National Futures Association and the Commodity Futures Trading Commission. This includes many outstanding options in the forex investment space, which is itself dominated by the U.S. dollar. In fact, many of the platforms generally regarded as the strongest forex platforms on the market cannot accept American traders. We have not included these platforms in this roundup as it is illegal for U.S. investors to use them.


Volatile currency pairs can provide both positive and negative trading opportunities. Learn more about forex volatility and the most volatile currency pairs, taking advantage of their price movements. As well as being a trader, Milan writes daily analysis for the Axi community, using his extensive knowledge of financial markets to provide unique insights and commentary.

At a minimum, this should be a stop-loss order to minimise the potential risk on trades, alongside a take-profit order. The currency market is decentralised, meaning there’s no single exchange that all transactions go through – unlike, for example, the New York Stock Exchange or London Stock Exchange. Instead, the forex market is built on an interbank system – a global network where financial institutions trade currencies directly between themselves. As a consequence, traders often find it difficult to verify the accuracy of the prices shown to them on the broker’s trading platform.

You can check and track relevant, popular Forex brokers spread with our handy Forex Broker Spreads Comparison Tool. Five years ago the spread expectation would be 1-2 pips higher for each of the pairs. Any broker who is not currently moving their spreads lower, is either not taking advantage of the newer technologies and/or remaining greedy. Let’s now look in detail at each of these key factors and analyse how important they are to help you make the right decision on choosing your next Forex broker.

The data sets quickly become cramped, windows compete with each other for space and if you try to track more than two data sets simultaneously the system quickly becomes very confusing to use. Based on the numbers above, here’s what an A-Book would make per month if its customers traded mini lots. Now you can see how difficult it is to operate as strictly an A-Book broker if you have customers who trade small position sizes. There’s also an A-Book volume fee that needs to be added to the broker’s costs. In this trade, the broker ended up with a loss of 300 pips, which means its counterparty, the LP, ended up with a gain of 300 pips.

As you can see, an A-Book broker barely makes money offering mini lots, only making about $1 per mini lot (10,000 units). The profit made from its trade with Elsa exceeds the loss incurred from its trade with the LP, so the broker still made an overall net profit of 2 pips or $600 ($300 x 2 pips). Because the broker had transferred the market risk to the LP, it avoided a loss when Elsa’s trade won. Now that the risk transfer process has been explained, let’s add in more details and see how A-Book brokers actually make money. Forex trading is exchanging where one fiat currency is exchanged for another, believing that the currency’s value will increase, allowing the trader to benefit from the increase.

Best-in-class web & mobile trading platforms, sales-driven CRM, full integration with MT4/5, and 150+ payment providers. A market maker LP would be more willing to work with a broker on a revenue sharing basis. This can create opportunities for more lucrative deals depending on your client type.

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