You can often hear such a thing as Forex STP brokers. Who are they and what are they doing? Such companies specialize in providing quick sales from customer orders to suppliers. STP accounts have a completely anonymous and very fast sale (faster than other brokers).
Typically, well-known banks and large brokers are a guarantee of liquidity. The Straight Through Processing order (this is how STP is decrypted) is traded precisely with them, and there are no intermediaries for such transactions. Therefore, for clients with STP accounts, orders are issued without delays or other difficulties.
How it works?
The main income of such brokers comes from a small margin on the Forex spread. Sometimes there is some percentage of the commission, which also brings income. The situation is extremely favorable, as brokers always make a profit (commission and margin), but traders can lose or gain money.
It also happens that brokers only allow access to a single liquidity provider, and some work with several at the same time (FXCM is a good example). The speed and quality of the executed order depends on the number of liquidity providers.
Quick operations
Thanks to the STP platform, fast trading is carried out in a real market environment, and orders are executed without intermediaries in a short time.
Floating or fixed spreads may also be provided. This is provided by brokers with an STP account. In general, in the chain of order execution, the broker is the middle link between the client and the international bank, the quote is taken, of course, with a spread using the interbank market. Some fixed spreads are offered by banks themselves.
Spreads on STP PRO trading accounts
An STP broker can choose one of two things:
- Floating spreads; for self-determination of the most successful price offers for bid and ask “Forex”, which are provided by market participants (banks), the broker must zero the spread with fixation. Quality is directly proportional to the amount of these spreads, as mentioned earlier. Such a system of work can be found among NDD (No Dealing Desk) brokers. Their orders are distinguished by the speed of execution and non-conflict based on interests. It is worth noting that requotes are also absent. Customers can choose an ECN account / STP version.
- You can choose and fixed spreads - in this case, the spreads received from the interbank are left unchanged by STP. In this case, some aspects of profit are removed, then the commission of STP accounts is introduced.
Purpose of STP Technology
All orders are accompanied by the so-called settlement risk, and many investors want to circumvent it. The meaning of this concept can be explained using the example of a bank transfer.
During the transfer of money (you can take 200 units of any conventional currency for example), the dispatch takes about three days. So, if the transfer of this denomination in US dollars (USD) is carried out by a certain person, three days after the start of the operation, the exchange rate can change dramatically, but no one knows how. An investor may lose a certain percentage or, on the contrary, succeed and gain profit. This accident is the calculated risk.
Now you can understand why there is a risk: due to a delay in payment. In the case presented above, three days are needed to clarify the details of the transfer and contact the intermediaries to clarify the information. At Forex, at this time, the transaction is adjusted and checked by the dealer.
Even in short-term second checks, as in situations with the foreign exchange market, the rate can change dramatically. In small volumes, the difference is insignificant, which can not be said about large transfers. Currency quotes are important here first.
Thus, risks are minimized on STP-accounts, for this they are arranged. No wonder their name means "direct processing" in translation into Russian. Their essence is that the order does not reach the intermediaries. The bank immediately considers it automatically, and everything passes through special "bridges".
This means that STP processing really does its job, speeding up the process and reducing the risk of all kinds of losses. On the STP accounts of various brokers you can familiarize yourself with the average duration of order processing.
What do STP brokers earn?
As mentioned above, STP brokers usually receive profit from the spread for the traded lot from the Forex trader or from the existing commission.
With the same quotes, orders are always sent to banks that could be opened by Forex traders who have their own STP trading account. Representatives for these trading lots charge a commission. It is brokers with STP accounts who are interested in the profit of these traders, since from the income of the trader they receive their earnings from the commission.
How is the STP account built?
It is always important for a new trader to know exactly how the STP account is arranged and how it works. This account is designed in such a way that risks are minimized, and therefore they can even be called insignificant.
Cash flow on such an account
Using an example, we can examine how exactly this STP PRO account works:
- A request for placing an order has been made, and he is immediately sent to the bank, bypassing the dealer, through special “bridges”.
- The organization of the bank is immediately taken to process such an order, and in the future, a strictly automatic mode works.
When a trader has ECN or STP accounts, he will not receive a hang on the execution of orders. Such work helps to increase the execution speed of such commands by an order of magnitude.
Which brokers have STP accounts?
When a trader decided to choose the STP account, he should know which brokers have them. Here are some brokers that have these accounts:
- RVDMarkets.
- GKFX.
- FXopen
- Forex4you.
- “Finam” (STP account and ECN account at the same time).
Benefits of STP Accounts
It is most preferable to work with such accounts to owners with particularly large deposits. It is important to pay attention to the fact that when placing an order, the condition for its opening at the most favorable price (at a price that will be of interest to the trader) is fulfilled. This is because here, even a slight movement of quotes will be noticeably reflected in the account itself.
It should be noted that the STP account is simply ideal for those who are used to applying a scalping strategy in their work. The most important thing for such market participants is the fast execution of orders. It is in this strategy that small profits are taken, and therefore it is so necessary to be able to exit the market on time.
Traders who are accustomed to value their time must open STP accounts. It is important to have a rigorously tested tactic and skillfully use it.
Final word
The above allows us to understand what an STP account is and how it works. Once the understanding of its principles has become closer, and all information about its advantages has been taken into account, the trader can begin to choose the appropriate broker. As you can see, this tool is able to significantly protect against losses.
