Most currency exchange brokers offering accounts to retail traders operate in one of two ways. It is doubtful that you’re going to be signing up with a broker who has their own dealing desk. More likely, you will be looking at either an ECN broker or a market maker.

ECN foreign exchange brokers use the Electronic Communication Network, a global online marketplace that caters for many differing types of trader from retail to the big banks and market makers. The spread on the ECN is small, often almost non existent, so brokers using this network will usually either add a couple of pips to the real spread or charge commission or costs per deal. You can often get better prices from an ECN broker but take a detailed look at their fee structure and consider what it would mean for you on a standard deal.

ECN brokers are often better for scalpers and may even welcome them because they are dealing directly with a gigantic market. Slippage isn’t so much of a problem either for scalping or at times of currency exchange stories reports. They also are sometimes well regulated.

On the downside, the variable spread can imply more uncertainty when setting stop losses and limit orders. ECN brokers also have a tendency to offer fewer charts and may have a less user friendly trading platform because they don’t seem to be in particular trying to attract amateurs. They tend to presume that you know what you are doing and have a paid subscription to do your technical research elsewhere.