Forex brokers are either a dealing desk or a “non dealing desk”. Once you know how they differ, you can see which is best for you.

What’s Behind the Dealing Desk?

Dealing Desk This is where a Forex broker has its own “in-house” trading desk that offsets your orders. In other words, they’re betting against you - taking the other side of your currency trades.

You win they lose, you lose they win; guess which way the odds are stacked.

These trading desks are hedging against poor traders, so they tend do quite well. They’re also providing the liquidity you need to get in and out of positions when necessary.

However, because dealing desk brokers bet against all the positions coming into their firm, usually they don’t want you taking longer positions. They don’t want you to scalp the market either because it’s too hard to offset their risks. Plus, they’re taking on all of the risk and they don’t have that much potential to profit.

You’ll tend to have more slippage on your orders with a dealing desk and more “re-quotes” of your currency pair. Slippage is the difference between what the price is when you click to buy or sell and what price your trade actually fills at.

Dealing desk brokers often require you to margin more to receive carry interest. This is also called “rollover” interest in the industry.

A dealing desk firm also tends to have wider spreads because they are taking on more risk as a firm. Your loss is their gain, and their loss is your gain.

You need to be careful with a dealing desk firm as they will often chase your stop loss i.e. if the market gets close to your stop loss they will increase the spread or push the market to your stop loss and take you out of the trade. You lose they win! They steal your money!

Trading is a Little Easier without a Dealing Desk

Non Dealing Desk brokers tend to be best for most traders. Here’s why.

There is no dealing desk. Rather, multiple banks place competing quotes onto the trading station. They are competing for your business as they try to give you the lowest buy and the highest sell price available. This also lessens your spreads between your buy/sell quotes.

There are many advantages to the “no dealing desk” model. It’s the one I prefer because I feel they are not trying to get me to lose my money like a dealing desk does. They make their money every time I trade not matter what happens to the trade.

Usually, there aren’t any re-quotes and there’s far less slippage with a dealing desk broker.

“Re-quotes” happen when a broker has to confirm a price to you as still being valid. This typically happens in faster moving markets. However, it takes away a lot of the “tradability” out of it at those times. And that’s what they’re actually hoping you do…either don’t trade at those times when they’re taking on higher risks than usual or trade at the “less favourable” quote. However, they’re not going to tell you that it’s a less favourable quote.

With non dealing desk, your firm doesn’t have a bias for or against your trade. The broker doesn’t profit if you lose or make money. The broker profits because they take a piece of your spread (the difference between the buy and sell quote).

The non dealing desk model acts as a “pass through” to the inter-banks. So these inter-banks are taking on the risk.

You can take longer term positions because your broker isn’t taking on the trade’s risk.

“Non Dealing Desk” Brokers don’t stop You from being Successful

If you do “too well” in a dealing desk brokerage, they’ve been known to close out your account. They don’t need a good reason why either.

The same goes for scalpers. Start scalping in a dealing desk brokerage and you’ll be getting a phone call telling you they are putting you on “dealer intervention.” This is where they have to delay your buys/sells to make sure that you have the “proper price.”

(A scalper is one who is trying to take advantage of small discrepancies in the market in a very short amount of time. Scalping produces extra risk for a dealing desk firm that they are uncomfortable with.)

In other words, they are going to make it difficult for you to profit off of them. So you might as well close out your account with them or risk losing it all, as the odds are stacked against you.