The foreign exchange market provides many opportunities for profit. There are different types of accounts on which traders can increase their capital. One of them is the recently appeared NDD-accounts. The trading conditions they provide attract more and more people. What are NDD accounts and what is the success of their growing popularity, this article will tell.
What is the danger of working through a dealership
The bulk of traders in their work at Forex use the services of dealerships. These companies act as intermediaries between participants in the foreign exchange market. Like any intermediary, they charge a commission for their work.
However, realizing that 95% of people who want to trade on Forex fail, dealing centers carry out transactions without withdrawing them to the interbank. Thus, all profits from the discharge of the deposit goes to the broker.
A similar method of earning dealerships makes them interested in losing money to customers. Some DCs use completely fraudulent schemes to earn money. For example, the popular client terminals MT 4, MT 5 can adjust the movement schedules of a currency pair at the request of a broker. In addition, the broker can cancel profitable transactions, move limit orders. A common way to cheat is to shoot down stops. In this case, DC employees, knowing the price zones where traders place stop orders, artificially change quotes. This closes profitable trades with a loss, and also opens trades that result in a loss.
Why NDD is popular
Of course, not all dealing centers sin with this, nevertheless, the popularity of the Forex market began to fall among ordinary traders. Many began to leave the foreign exchange markets for commodity exchanges, where trading is more transparent.
Now the broker's ability to play against the trader has significantly decreased. Because NDD accounts are a new approach to trading. NDD (Non Dealing Desk) translates to “no dealer.” This means that the transaction does not remain inside the dealership, but is displayed on the interbank, where it finds its counterparty. That is, the buyer finds the seller, and the seller of the buyer.
How transactions are carried out on NDD accounts
The NDD technology consists in the fact that applications for a transaction are displayed directly on participants in interbank foreign exchange trading. To do this, the system displays the trader directly to liquidity providers. Liquidity in this case is provided by the largest banks in the world, such as HSBC, Deutsche Bank, Citi, UBS, Barclays, Bank of America.
For work on NDD accounts, the usual Metatrader terminals are used, from which transactions on major currency pairs and metals (silver, gold) can be carried out.
A broker providing transaction withdrawal services to an interbank bank uses an end-to-end transaction processing system (STP). The broker's level can be estimated in this case by the number of its partner banks. The more of them, the more favorable conditions can be obtained for transactions. And the broker himself receives a commission for the conclusion of the transaction.
What are the benefits of NDD technology?
The technology of NDD accounts has many advantages:
- The broker is not interested in draining the trader’s deposit, but rather in his successful work. That is why many brokers set a high threshold (about $ 500 / 34,000 rubles) for opening an NDD account on Forex. It is beneficial for them that transactions take place at higher volumes and be completed as often as possible. Their profit depends on it.
- Another positive aspect of the technology is the high speed of opening orders. This happens because the intermediary link is excluded in transactions.Often an order opens faster than 1 second.
- Low or no spread. When working on regular accounts, the spread is formed as the difference between the quote price and the price at which the broker agrees to open a trading order. The difference can be from 2 to 30 points and above, depending on the liquidity of the currency pair. When working with NDD accounts, the spread often narrows to 0 points, which is very important when working with scalping strategies.
- Lack of requotes. Requests are repeated requests of the broker at the time of closing the transaction. It often happens that, closing a position, the broker reports that the price has changed and asks if you are ready to close the order at a different price. As a rule, this price is less favorable for the trader. This phenomenon often occurs at the time of the release of important economic news, when the currency has great volatility.
Nevertheless, slippage at the time of transaction is possible. However, due to the high processing speed of applications, they are minimized. Even the opposite situation is possible when the application will be processed at a better price for the trader.
Why do I need a cent account NDD
Not many professional traders use cent accounts. As a rule, they are limited by the maximum deposit amount ($ 1,000 / 68,000 rubles). Therefore, transactions with a lot of lottery on them are impossible. Then what are cent accounts used for? First of all, they exist for:
- Attracting newcomers to trading. It is more reasonable for a person who does not have experience to open an account on which it is impossible to drain a large deposit.
- Testing new strategies by experienced players.
- Attracting new customers by dealerships. On these accounts you can see how well the broker fulfills the terms of the contract, check how much the quotes provided by the broker correspond to the quotes of other suppliers, and check how the support service resolves conflict situations.
- Testing the work of advisers - programs that automatically trade according to specified algorithms.
Some dealer companies, for example, Forex4you, RoboForex, ForexClub, Instaforex offer their customers a cent NDD account with a deposit of $ 1 or more. The main tools are also available on this account: currency pairs, commodity assets. Unlike a regular cent account with a fixed spread, a CENT NDD account has a floating spread of 0.1 pips, which can expand at night and during periods of low liquidity. In addition to the spread, you will have to pay a commission for opening a transaction. It is 10 dollars (680 rubles) when opening a deal with a volume of 1 lot.
Varieties of NDD
NDD trading accounts have two special cases - these are ECN accounts and STP accounts. These two species are similar to each other. Both of them provide transactions without the participation of a dealing company. However, there is one significant difference between them.
If there are several participants in the ECN accounts in transactions (traders who want to sell, traders who want to buy, banks - liquidity providers), then the order to buy or sell a currency pair on the STP account goes directly to the bank. This circumstance makes higher demands on the size of the deposit.
Should I switch to STP accounts
Of all the types of trading accounts, the fastest way to execute orders is using the STP (Straight Through Processing) technology. This is due both to working directly with the bank, and to the fact that banks are constantly improving equipment.
Another advantage of STP is the protection against manipulation of quotes and the spread.
For all its advantages, STP accounts have disadvantages in the form of a large deposit size and a small leverage, which is limited by a ratio of 1: 200.
The final drawback is the lack of futures contracts among instruments. This is due to the fact that futures are derivatives of real instruments, therefore such contracts are traded on the sites of dealing centers. Whereas transactions using STP technology are carried out inside banks.