How to Choose a Broker for Large Forex Trading Accounts

As the Forex market becomes increasingly prosperous, the number of Forex merchants is also gradually increasing. So how should Forex merchants choose? Let me introduce it to you below.

Generally, brokers with legal licenses to provide trading services are the primary qualifications. However, not all licensed brokers are able to offer large account trading. Many regulated Forex brokers do not recommend customers with large trading volumes, because some brokers' customer base is scattered investors, and their trading volume may not be large. This situation is a bit embarrassing for customers with large transaction volumes.

What counts as a large trading account?

Of course, there is no clear definition, but it usually refers to accounts with funds of $10, 000 and above. Through the leverage ratio, trading on this kind of account can be very large. Of course, some people think that large trading accounts require funds exceeding one hundred thousand or even one million US dollars. However, for a retail investor, if he is willing to invest $10, 000 in Forex trading, he should treat the transaction as seriously and professionally as a large account customer.

Conditions that brokers that provide large account services need to meet

Most brokers will classify customers with an amount of $10, 000 as VIP customers and therefore provide some additional benefits and trading conditions. If you have enough capital to trade, then be sure to maximize your capital so that it can bring you more profits.

1.Account type

Brokers that can provide large trading accounts must have set up independent account types and trading conditions for this purpose. Account holders can obtain preferential conditions and rewards that other traders do not have.

2. Supervision

If there is a time when Forex traders are most worried about broker regulation, it is when they open a large trading account and make a deposit. Traders must ensure that the broker is strictly regulated. Regulated brokers are required to ensure transparency and the safety of client funds. Do not believe the broker's verbal promises, but check the broker's status on the official website of the regulatory agency yourself. Although you cannot trust all the reviews of brokers on the Internet, some valuable information can still be helpful in distinguishing the quality of this broker. After all, depositing more than $10, 000 is inherently risky for traders.

3. Platform type

For clients with large trading accounts, many prefer the Direct Market Access (DMA) platform, which allows them to trade the interbank Forex market. This also means that these traders can trade directly with large banks and liquidity providers through the ECN trading platform, with better quotes and transparency.

4. Amount of funds

In the past, a well-known Forex broker, UK Avery, was regulated by the UK and provided ECN/DMA platforms to large accounts. It was indeed a high-quality broker. However, the company eventually went bankrupt during the Swiss franc crisis. Alpari UK is not the only broker to experience severe market volatility, but most others have survived. The difference is that Avery UK has insufficient funds and insufficient internal risk monitoring.

Therefore, the financial status of a Forex broker is very important, and traders should also focus on the broker's financial report. If you want to deposit a large amount of money into a trading account, you must at least ensure that the chosen broker has a strong financial background and can withstand unexpected risk events.

5. Account isolation

A very important criterion for a good broker is to be able to meet customers’ withdrawal requirements at all times. Most countries require Forex brokers to segregate and store client funds to ensure the independence of funds and not being mixed. Then, as long as a customer has a withdrawal request, the broker should review and process such application as soon as possible. However, withdrawing money from a large trading account may be a little complicated, but if the broker can ensure that there are no problems with the withdrawal, it will leave a good impression on the customer.

For large trading accounts, it is best to choose an ECN/STP broker

ECN/STP brokers pass all customer orders directly to liquidity providers without having their own trader processing platform. The broker's platform also directly connects to liquidity providers. ECN/STP brokers usually have more than one liquidity provider to ensure that customer orders can get the best quotes.

There is no conflict of interest between ECN/STP brokers and clients. Clients are equivalent to trading directly with liquidity providers. If the client makes a profit, the broker takes the profit from the liquidity provider; if the client loses money, the broker hands over the funds to the liquidity provider. This is also the most different place from market makers.

The profit of ECN/STP brokers comes from the additional spread. Suppose the broker adds 1 pip, and the liquidity provider's spread is 1 pip, then the spread the customer sees on the platform is 2 pips. If you make a profit of 100 points, then your actual profit is 98 points; if you lose 100 points, then what you actually need to pay is 102 points. In short, your loss has nothing to do with the broker, so there is no conflict of interest.

The profit model of Forex trading platform

1.DD or market maker

Market makers make profits through spreads, and when necessary, trade in the opposite direction with customers to make profits from bets. For example: If you want to buy a certain amount of EUR/USD from a DD-type Forex broker, the broker will first look for an order to sell the same amount of EUR/USD from its client's order, or hand your order directly to the bank. However, if there is no order in the opposite direction that can match your order, they will trade against you in the opposite direction.

2.NDD type Forex trading platform

　　(1)ECN

The spreads on the ECN trading platform are all floating. Among several brokers, only ECN brokers charge commissions from traders. This is also the only way for ECN brokers to make money, because ECN brokers do not make money through spreads.

　　(2)STP

The STP broker acts as an intermediary and sends all traders' orders to the bank. At the same time, the bank sends the spread and other information to the STP broker. After receiving the spread information, the STP broker has two options: one is to keep the spread fixed, and the other is to select the best buying and selling prices from several banks (the more the better) and let the spread float.

So how do STP brokers make money? STP brokers, like ECNs, do not trade against traders. They add a small amount to the spreads they obtain from banks. For example, add one point or half a point to the lowest selling price provided by several liquidity providers, and subtract one point or half a point from the highest buying price provided. STP brokers make profits by adding points, and then all traders' orders are sent to the bank at the actual price.

In other words, traders' profits and losses will not have any impact on the broker's profits. What they care about is the frequency of your transactions.

3. Mixed STP mode: DD+NDD

Many STP brokers use a hybrid STP model.

STP brokers will sign a commercial contract with the bank, which stipulates the minimum transaction size acceptable to the bank. Generally speaking, for larger orders (usually ≥0.1 lots), STP brokers will send the orders directly to the bank.

Small transaction amount orders (generally ≤ 0.1 lot) is not accepted by the bank, so it will not be sent directly to the bank by the trading platform. So how does the STP broker process this kind of order? They then adopt the DD processing platform model to perform internal hedging on the platform. For mini accounts, this hybrid STP broker basically does this.

DD/MM type brokers are the most distinctive. They make profits not only through spreads, but also through traders' losses, because brokers can hedge. In other words, the more traders lose, the more the broker profits. ——This is what we commonly call “dealing-desk platform”.