Forex trading is a widely popular activity, and it offers a great opportunity for traders to make money. However, like any other financial instrument, forex trading comes with its own set of risks. One of these risks is non-dealing desk (NDD) execution.
NDD is a type of forex execution model in which traders’ orders are sent straight to the interbank market without passing through a dealing desk. In this model, traders’ orders are matched directly with liquidity providers, such as banks and financial institutions. This means that traders get direct access to the market, without any intermediaries.
NDD execution is also known as straight-through processing (STP) or electronic communication network (ECN) execution. It is different from dealing desk execution, where a broker acts as a market maker and takes the other side of the trade.
The NDD execution model offers several advantages for traders. The first advantage is transparency. In this model, traders get a clear view of the market and can see the real-time prices and spreads. This transparency helps traders make informed decisions and reduces the risk of price manipulation by brokers.
The second advantage of NDD execution is better pricing. In this model, traders get access to the interbank market, which offers better pricing and tighter spreads. This means that traders can save money on trading costs and increase their profits.
The third advantage of NDD execution is faster execution. Since orders are sent directly to the market, there is no delay in execution. This means that traders can enter and exit trades quickly, which is important in a fast-moving market.
However, there are also some disadvantages of NDD execution. One of the main disadvantages is the possibility of slippage. In a fast-moving market, the price may change quickly, and traders may not get the exact price they wanted. This can result in slippage, which is the difference between the expected price and the actual price at which the trade is executed.
Another disadvantage of NDD execution is the possibility of requotes. In a volatile market, the liquidity providers may not be able to provide the requested price, and the order may be rejected. This can result in a requote, which is a new price offered by the broker.
To avoid slippage and requotes, traders need to use limit orders and stop-loss orders. Limit orders allow traders to enter a trade at a specific price, while stop-loss orders allow traders to exit a trade at a specific price. These orders help traders control their risk and avoid unexpected price movements.
In conclusion, NDD execution is a popular forex execution model that offers several advantages for traders, including transparency, better pricing, and faster execution. However, it also has some disadvantages, such as slippage and requotes. To avoid these issues, traders should use limit orders and stop-loss orders and choose a reputable broker that offers NDD execution.
