STP brokers have got many positive feedback from traders.
Before I point out “the 5 things you should know about STP & OTC Forex brokers”, let me explain the difference STP and OTC brokers.
*Please note that many online brokers do not introduce if they are STP or OTC brokers, and even if they have mentioned that they are STP broker, that doesn’t necessarily mean that they are the real 100% STP brokers.
| STP stands for | Straight Through Processing |
|---|---|
| STP company acts as | a broker(middleman between exchange markets and traders) |
| Traders will | trade through the actual exchange market |
| OTC stands for | Over the Counter |
|---|---|
| OTC company acts as | a Market Maker(represent as a market instead of the actual exchange market) |
| Traders will | trade with the broker only, but not any exchange markets |
STP brokers are more appreciated by traders, because they only do their job as a broker and not taking risks in order to earn extra profit.
Here, 5 facts that you may need to know before you start trading with Forex brokers.
1. Number of STP brokers
There are only a few STP brokers in the world.
Well, no one knows the actual numbers though, 100% complete STP brokers are rarely seen.
So what are others?
Most of the online Forex & CFD brokers adopt half STP and half OTC model.
So many brokers choose if they:
- act as a OTC broker and hedge(cover) its clients’ trades
or
- act as a STP broker and send its clients’ trades directly to the exchange market
depending on traders’ knowledge and level.
But you can not confirm if your trades are hedged or really sent to the exchange market unless your broker can provide you with the official confirmation from the liquidity providers showing the details of your trades.
2. OTC makes more money
OTC brokers surely makes more money than the STP brokers.
STP brokers only makes money only when its traders trade and pay for the markup spread.
On the other hand, OTC brokers will make money from the markup spread and also when its traders make losses by trading.
And it is known that more than 80% of traders lose all of their invested funds in Forex markets, so OTC brokers are more likely to make money by just hedging its clients’ trades.
Have you lost 1,000 dollars by trading Forex? Well then your broker might have made 1,000 dollars at the same time.
3. Trading Restrictions
There is no trading restrictions by STP brokers at all.
Scalping, News Time trading, EAs and Arbitrage tradings are all allowed by the real STP brokers, because there is no merit for restricting such trading methods for STP brokers.
On the other hand, OTC brokers do prohibit some trading methods and even cancel profits made on unauthorized trading method by its traders.
Why OTC brokers restrict some profitable trading methods?
That is because they are hedging your trades and there is a conflict of interest between traders and the brokers.
*Only thing which is restricted by STP brokers is, “Latency Arbitrage” on CFD instruments.
4. Execution Quality is same
Well STP and OTC sounds really different though, it doesn’t really affect the execution speed or quality.
So in terms of slippage, re-quotes, order rejections and execution speed, these depend on the quality of the trading server, order settings and how deep is the market which the broker has acquired for traders.
So STP does not equal to “High speed of execution” or “high quality of execution” etc.
5. OTC is more popular
There are some huge online brokers though, almost all of them are half OTC & half STP brokers.
There may be no complete STP broker which is categorized as a huge broker in the world.
It is because, OTC brokers makes more money, and can afford to offer more bonuses and promote its brand with many medias.
Some STP brokers have got only a few staff members with small office.
Who it the 100% complete STP broker?
As far as we have seen, there are two complete STP brokers being active recently.
GBE Brokers
GBE Brokers is a CySEC regulated online Forex & CFD broker in Cyprus.
The main conditions are as follows:
- Leverage up to 1:500
- Spread from 0.6 pips(all extra commissions included)
- MetaTrader4 trading platform
- Over 140 available trading instruments
GBE Brokers allows positive slippage in its trading accounts and in order to upgrade the execution speed, the broker has set its trading server in Equinix LD4 Data Center.
Traders Trust
Traders Trust has been active over 7 years as a complete STP broker.
The broker has got many positive reviews and it wouldn’t be a wrong choice to trade with this broker.
The main conditions are as follows:
- Leverage up to 1:500
- Spread from 1.2 pips(all extra commissions included)
- MetaTrader4 trading platform
Its group company TTCM Investment offers “High Profit Rate PAMM Solution”.
The target income is up to 100% annually with minimum draw-down.
If you are looking for someone to manage your funds, why not choose a investment company instead of some individual Money Managers.
You can find out more details of this PAMM service from the below link.
