There are two major types of forex brokers investors should be aware of. There are market makers and Electronics Communications Network (ECN) brokers, of which both have their benefits and contrary points that make them both very unique.

The forex market maker in essence is a bank or brokerage company that is always available to trade with a firm bid and ask price. Conveniently, when the investor chooses to buy and sell a pair of currencies, the market maker will purchase from and sell to the investor, even if there is no buyer or seller readily available. They are actually making a market to buy or sell the currencies in.

Forex market makers make certain that the market remains serviceable and that the currencies in it will always obtain the market rate. Market makers update their prices at intervals of at least 30 seconds and proceed to trade if requested. They have a duty to carry out obligations despite the economic situation being favorable or unfavorable, causing them to sometimes lose profit.

ECN forex brokers (read more about: ECN forex brokers) do not typically have a dealing desk. They provide a networking core comprised of other market makers and financial institutions. They make it possible for traders to enter bids into trading software or a location outside the market spreads. This increases the chances of better spreads.

Any order by the trader is sent to the best bid offer available. The spread range is usually much better than that made by a market maker. ECN forex brokers do charge commission fees for obtaining such good spreads which do vary across the board.

This is how the forex broker actually makes their money since the spread they offer is so extremely low. This doesn't do much damage to the trader's pockets considering they are able to benefit by getting in at a much better price. ECN brokers simply match your offer and send it to the best asking price in the computer network.

Both brokers have their pros and cons. The prices market makers offer are less volatile but you do sometimes risk the possibility of a market maker manipulating prices and taking position against you. Market makers also may not make themselves available around the clock to take advantage of high volatility prices. With an ECN broker, you may not get the best available news related to the market but you may get the best bidding price in most instances. Both should be tested to determine your preference.