There are many types, kinds, and quality of forex brokers online. The four main types of brokers are kitchen brokers, small brokers, market makers, and forex market operators. Starting with the worst brokers that you have to protect yourself with to the largest and best forex brokers:
The Kitchen Forex Brokers
The have a core foundation on the fact that most forex traders slowly lose their money. So the profits of the kitchen brokers are by the loss of their client’s money. Sometimes the broker shuts down, but not always, and could reappear under a different name. These forex brokers tend to offer to teach you for free and to learn how to trade forex. They make claims that forex trading is easy with terms like easy forex, and that there are unbelievable profits in very short periods of time (you too could make 1 billion dollars in 24 hrs). Kitchen brokers also want you to open an account with one thousand dollars so that you can make 5% per month easily and anything less than that makes it difficult to reach those types of profits. The free forex training that they provide only last a couple of hours and are usually by people who have never actually traded, and that are getting their training material from other free training sources, none of which are adequate for making money in the forex.
Sometimes these brokers use forex software to entice clients. They use examples of how this forex software helped other clients reach astounding gains like 200% per week which were typically taken during long trending currency market time periods were even a five year old child could make money during those times. The vast majority, in excess of 95% of the clients that are gaining free forex training are losing their accounts, however they believe that the free forex training out there is making them better, so they try their new techniques. When that fails they seek out and gain a little more free training yet again convincing themselves that they will be profitable. Many of these forex traders run out of money fast and leave the forex market all together (which is not good for the foreign currency trading market), while other forex traders deposit more money for another change because they are convinced that they will be successful, until they too lose their accounts again and those trader too flee the fx market.
This is when the Kitchen Brokers win. What if? a broker tells you that you have a live account, but in actuality you have demo account with the amount of funds you gave them? Let’s think about that for a minute.
It has even been diagnosed (we still don’t have hard core proof) that these kitchen brokers do not even place your trade on the inter-banking forex system. Just as a demo account is a dummy account that you can lose in, so is your real account for these low integrity fx brokers. Can you ?prove? that a forex broker did not actually place your trade on the inter-banking forex network? Not with hard core evidence that would hold up in court. These brokers know this, so your money is held in their account, and they show you that your strategy is losing just like in a demo account. Your real trading account is basically a real demo account. You lose your account balance and leave the forex market and they keep you money. Come on, how is a forex broker going to really make money on 2 pip spreads trading $100 to $1000 per trade? So these brokers, and some of them are even big named brokers that come up to the top of the search results are betting on people losing their accounts their accounts and offer free training to give just enough rope to hang yourself.
The small brokers work with the Market Maker Forex Brokers to place trades for traders that have accounts from less than one thousands dollars to several tens of thousand dollar accounts, we call these small capital accounts. Most of the online brokers that we are deal with are either small forex brokers or kitchen brokers. The goal of our trading career is to start out with a small forex broker and make enough money to open an account with a larger Market Maker currency broker.
Market Maker Forex Brokers
Market Makers are financial companies which work with smaller broker companies and offer hypothetical opportunities of Forex trading to individuals whose trading capital exceeds $50,000. They offer lower cost forex trading and as a rule have more reliable financial base and integrity. By having the high requirement of a fifty thousand dollar account balance they keep new and inexperienced forex traders at away.
Market Operators Forex Brokers
This is the most trust worth brokerage types which includes big commercial banks which are regulated according to bank laws and rules. To trade with these banks one needs very large investment capital. This keeps the large capital private investors at bay, the minimum deposit is approximately greater than $1,000,000.