This article is for those who are thinking about starting XM Trading or have already started. XM Trading uses the NDD method. However, many people may not know what DD and NDD are in the first place, so I wrote an article about the difference.
What is the DD method?
The DD method stands for “Dealing Disk”, and the dealer intervenes between the trader and the interbank. It is at the dealer’s discretion whether or not to pass your order to the interbank. In the DD method, the more the trader loses, the more profit the Forex company makes. It is rumored that DD-type Forex companies intentionally create a system that makes traders lose.
What is the NDD method?
The NDD system stands for “Non Dealing Disk” and does not involve any dealers between traders and interbanks. In other words, all trader orders flow to the interbank. A company can only profit from spreads. The NDD method provides a transparent trading environment that eliminates the possibility of contract refusal and slippage in exchange for wide spreads.
Difference between DD method and NDD method
DD method with narrow spreads and opaque trading. Wide spread/transparent NDD method. Which one is better depends on your personal opinion. If there is fraud in the organization, the DD method is often adopted. Personally, I think the NDD method is more transparent and better.
Disadvantages of the NDD method
XM uses the NDD method, but this method is not perfect. Of course there are risks.
width of the spread
The disadvantage of XM adopting the NDD method is the wide spread. It can be said that XM is unsuitable for scalping. However, in the case of XM, there are courses that specialize in scalping such as KIWAMI pole account and zero account, so there are places where it is difficult to say anything.
slippage
Since the NDD system sends traders’ orders to the interbank market, slippage is likely to occur during times when the volume is low. You can set the allowable amount of slippage, so if you want to do short-term trading or automatic trading, set it first.
Advantages of using the NDD method
XM uses the NDD method, but there are of course advantages.
Transaction transparency
The biggest advantage of the NDD method is fairness and transparency. Since nothing is intervened, there is an advantage that the trader can trade comfortably because the possibility of being manipulated can be eliminated.
STP method and ECN method
In addition to the NDD method, there are two ordering methods, the STP method and the ECN method. In the STP method, the trader is presented with the rate that the FX trader added the spread to the rate presented by the cover party. On the other hand, the ECN method is a method of placing orders directly to the market where institutional investors, individual traders, banks, FX brokers, etc. trade.
XM’s zero account is operated by this ECN method, and micro account and standard account are operated by STP method.
How the STP method works
In the STP method, when an individual investor opens a trading platform such as MT4, a broker obtains price information from a financial institution that has access to interbanks called a “cover destination” and transfers it to the individual investor with a certain spread. Provides prices for currency pairs. Buying, selling, and settlement will be done based on the amount presented. In order processing using the STP method, a certain spread is added to the interbank transaction price, so the disadvantage is that the spread tends to become wide.
How the ECN method works
In the ECN method, the price of each currency pair traded interbank is presented to individual investors as is. The difference from the STP method is whether or not a broker is involved. The advantage of an ECN account is that the spread tends to be narrower. However, while the spreads are narrow, commissions are charged for each purchase and sale. This point is a disadvantage over STP. Also, one of the disadvantages of ECN accounts is that many brokers have a high minimum deposit amount.
Both STP account and ECN account available
Most FX brokers, including XM, offer both STP and ECN accounts. This is because both sides have their own reasons. In an STP account, the broker accounts for a certain spread on the price provided by the covered party. In an ECN account, the price that is being bought and sold at the interbank is displayed as is. At XM, the standard account is an STP account, and the narrow spreads Zero and KIWAMI are ECN accounts.
No bonuses are generated on ECN accounts.
There are many cases where you cannot receive a bonus even if you have an ECN account. The reason for this is that brokers receive only buying and selling commissions from ECN account users, and their profits are extremely thin. Therefore, we do not issue bonuses. With STP, brokers earn more profits, so they offer bonuses to encourage traders to trade more and more.
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