There are two main types of trading methods used by overseas forex brokers: the NDD method and the DD method
Furthermore, since the NDD method is divided into two types, ECN and STP, many people may be wondering which method they should use for trading
Therefore, this article explain in detail the differences, advantages, and disadvantages of the NDD (Non-Desktop) and DD (Direct Deposit) systems .
also introduce who is suited to the NDD and DD methods, as well as the characteristics of the ECN and STP methods , so please refer to this information.
Contents
- 1 Types of overseas forex trading methods
- 2 What is the NDD method? What are its characteristics?
- 3 What is the DD method? What are its characteristics?
- 4 Differences between NDD and DD systems
- 5 Advantages of the NDD method
- 6 Disadvantages of the NDD method
- 7 Advantages of the DD method
- 8 Disadvantages of the DD method
- 9 People who are suited to the NDD method
- 10 People who are suited to the DD method
- 11 Frequently Asked Questions about NDD and DD Methods in Overseas Forex Trading
- 12 Summary of NDD and DD methods for overseas forex trading
Types of overseas forex trading methods
The types of trading methods used in overseas forex trading can be categorized as follows:
There are two main types of junction boxes: NDD and DD the NDD type is divided into ECN and STP.
The characteristics of each will be explained in detail below
What is the NDD method? What are its characteristics?
NDD stands for "No Dealing Desk," and a trading method that directly connects investors' orders to the interbank market (electronic exchange) .
Interbank: A place where orders from investors and financial institutions are gathered
The NDD (No Dealing Desk) method is characterized by its system-driven processing of orders and trades, allowing for direct transactions with the market without going through an FX broker .
The NDD method is further divided into the ECN method and the STP method.
These two trading methods will be explained in detail below
If you want to learn more about the NDD method, please refer to this information
What is the ECN system? What are its characteristics?
The ECN (Electronic Network Unit) system connects investors' orders directly to the market and automatically matches them with orders from other investors .
Because it directly connects investor orders to the market, characterized by high transparency and fairness, as well as fast order execution speed .
With the ECN method, no spread is added to the rate, but a trading fee is incurred for each transaction
While the transparency is very high, be aware that trading fees are charged in addition to the spread
What is the STP method? What are its characteristics?
a system that automatically selects the most favorable price for an investor from among the rates offered by multiple financial institutions, such as banks, based on orders received from investors .
The STP method characterized by its high processing speed and ability to reflect actual rates in real time .
However, because orders received from investors are automatically selected from multiple institutions, transparency is inferior to that of an ECN
Furthermore, since transactions are conducted at a price that includes a commission, spreads tend to be wider than with the ECN system
Compared to the ECN method, it is inferior in terms of transparency and narrow spreads, but it has advantages in processing speed and trading at real rates
What is the DD method? What are its characteristics?
DD stands for "Dealing Desk," and a trading method where transactions are conducted through an FX broker .
A key characteristic of FX trading is that investors do not trade directly with the market, but rather with FX brokers
In other words, investors don't place orders on the market; instead, they place orders with brokers at their desired rates and have them executed.
Therefore, compared to the NDD (No Dealing Desk) method, the transparency of transactions is lower, and execution tends to be slower
Differences between NDD and DD systems
The differences between the NDD and DD methods are shown in the following table
| DD method | NDD method (STP method) | NDD method (ECN method) | |
|---|---|---|---|
| Intervention by FX brokers in trading | can be | none | none |
| transparency | low | expensive | very |
| execution speed | slow | fast | fast |
| spread | narrow | wide | narrow |
| Scalping | Easily regulated | No restrictions | No restrictions |
| Revenue sources | Customer losses | Spread, trading fees | Spread, trading fees |
The main differences between the DD (Dealing Desk) and NDD (No Dealing Desk) systems are whether or not the FX broker intervenes in the trading and their source of revenue .
These differences result in variations in transparency, execution speed, and spreads.
Many overseas forex brokers use the NDD (No Dealing Desk) system, while many domestic forex brokers tend to use the DD (Dealing Desk) system
Advantages of the NDD method
Here, we will explain in detail the following three advantages of the NDD (Non-Dealing Desk) method
If you're thinking about trading using the NDD (Non-Dealing Desk) method, please use this as a reference
High transparency in transactions
The advantage of trading using the NDD (Non-Dealing Desk) method the high level of transparency in transactions .
The NDD (Non-Dealing Desk) method allows you to trade directly with the market without going through a broker, so you are not subject to trading manipulation by brokers
In other words, because transactions can be conducted at rates offered by financial institutions, etc., it allows for highly transparent and fair trading.
Small time lag for execution
The advantage of trading using the NDD (Non-Dealing Desk) method the time lag before order execution is minimized .
Because you don't go through an FX broker during the transaction, the speed at which transactions are completed is faster
Because a smaller time lag means a shorter time to complete a transaction, the NDD (No Dealing Desk) method increases the likelihood of trading at your desired price.
Easy to scalp
The advantage of trading using the NDD (No Dealing Desk) method makes scalping easier .
This is related to the spreads and transaction fees that are the revenue sources for the NDD (Non-Dealing Desk) system
Scalping is a trading method that involves making many trades in a short period of time, so the more trades there are, the higher the profits for the FX broker
Furthermore, because the NDD (Non-Dealing Desk) method directly interacts with the interbank market, settlement speeds are fast, making it well-suited for scalping .
Therefore, NDD (No Dealing Desk) trading is suitable for those who want to engage in scalping trading
Those who engage in scalping should also check out recommended accounts and tips for scalping
Disadvantages of the NDD method
Here, we will explain in detail the following two disadvantages of the NDD (Non-Dealing Desk) method
If you are planning to trade using the NDD (Non-Dealing Desk) method, please refer to the following information
Wide spread
The disadvantage of trading using the NDD (Non-Dealing Desk) method the spread is wide .
for the NDD (Non-Dealing Desk) system is the spread, brokers try to increase their profits by widening the spread.
Therefore, compared to the DD (Dealing Desk) method, which has different revenue sources, the spread will be wider
For brokers with narrow spreads, please check our recommended overseas forex broker rankings based on spread comparisons
Low leverage
The disadvantage of trading using the NDD (Non-Dealing Desk) method the low leverage .
While the NDD (No Dealing Desk) system is widely adopted by overseas forex brokers, most brokers that offer NDD trading only offer leverage of up to 500 times
Therefore, it is often not possible to trade with the high leverage that .
When trading with high leverage, be aware that the brokerage may not be using the NDD (No Dealing Desk) system
For brokers offering unlimited leverage, please check our leverage comparison and recommended overseas forex broker rankings
Advantages of the DD method
Here, we will explain in detail the following two advantages of the DD (Direct Debit) method
If you're currently wondering whether to trade using the NDD (Non-Dealing Desk) or DD (Dealing Desk) method, please use this as a reference
Narrow spread
The advantage of the DD (Dealing Desk) method the spread is narrow .
Forex brokers that employ the DD (Dealing Desk) system primarily generate revenue from customer losses
Therefore, because they do not rely on spreads as a source of income, they can set narrow spreads .
For those who are concerned about spreads and transaction fees, the DD (Dealing Desk) system offers cheaper trading
Even minor currency pairs are easy to trade
One advantage of the DD (Dealing Desk) system makes it easier to trade minor currency pairs .
The DD (Dealing Desk) system ensures high liquidity for any currency because the FX broker receives and processes investor orders.
On the other hand, with the NDD (Non-Dealing Desk) method, minor currency pairs with low trading volume have low liquidity, making it difficult to execute trades
For those who want to trade currency pairs with low trading volume, the DD (Dealing Desk) system is easier to use
Disadvantages of the DD method
Here, we will explain in detail the following two disadvantages of the DD method
- Slow execution
- Low transparency in transactions
- Requotes are likely to occur
- Scalping and free trading are difficult
If you are planning to trade using the DD (Dealing Desk) method, please refer to the following information
Slow execution
The disadvantage of the DD (Dealing Desk) method trade execution is slow .
Because the DD (Dealing Desk) method involves trading through an FX broker, order execution tends to be slower than the NDD (Non-Dealing Desk) method
Therefore, a long time between placing an order and its execution means that the order may not be executed at the desired rate
When trading, keep in mind that there may be delays in order execution
Low transparency in transactions
The disadvantage of the DD (Dealing Desk) method the lack of transparency in transactions .
In the DD (Dealing Desk) system, the FX broker intervenes in the trading process, meaning investors don't know what criteria are being used for the trades
Therefore, it becomes unclear whether your order was accepted or not, resulting in a lack of transparency in transactions.
Requotes are likely to occur
The disadvantage of the DD method requotes are more likely to occur .
Requote: When an investor's order is initially rejected, and then a new price is offered by the FX broker
When an FX broker accepts an investor's order, a requote occurs, which is added to the actual rate
Therefore, in the DD (Dealing Desk) system, where investors and FX brokers interact, a middleman takes over the transaction, making requotes more likely
Many FX brokers do not allow scalping
One disadvantage of the DD (Dealing Desk) system many FX brokers do not allow scalping .
With the DD (Dealing Desk) system, the FX broker processes the investor's order before it is routed, so scalping, which involves making many trades in a short period of time, is often not possible.
For those who want to engage in short-term trading, the DD (Dealing Desk) system is not suitable
However, in the case of long-term trading, scalping is irrelevant, so trading is possible without any problems
People who are suited to the NDD method
From here, we will explain in detail the following two points about who the NDD method is suitable for
If you're interested in trading using the NDD (Non-Dealing Desk) method, please use this as a reference
People who prioritize safety
NDD (Non-Dealing Desk) trading is suitable for people who prioritize security .
The NDD (Non-Dealing Desk) method connects investors directly with the interbank market, allowing them to place orders at their desired price and offering a high level of security for transactions .
Since requotes can occur with the DD (Dealing Desk) method, we recommend the NDD (Non-Dealing Desk) method for those who want to trade with peace of mind
People who want to do scalping
NDD (No Dealing Desk) trading is suitable for people who want to engage in scalping .
The NDD (Non-Dealing Desk) method allows for direct transactions with the interbank market, resulting in faster settlement speeds and making it well-suited for scalping .
Some FX brokers prohibit scalping under the DD (Dealing Desk) system, so those who want to scalp should trade using the NDD (No Dealing Desk) system
However, NDD (Non-Dealing Desk) systems tend to have wider spreads, so it's important to check them beforehand in order to trade with the narrowest possible spread
People who are suited to the DD method
From here, we will explain in detail the following two points about who the DD method is suitable for
If you're interested in trading using the DD (Dealing Desk) method, please use this as a reference
People who want to trade with a narrow spread
DD (Dealing Desk) trading is suitable for people who want to trade with narrow spreads .
the DD (Dealing Desk) system's revenue comes from customer losses, the spreads are narrower compared to NDD (Non-Dealing Desk) FX brokers.
Since spreads are always incurred when trading, we recommend trading using the DD (Dealing Desk) method if spreads are a concern
People who want to trade even minor currency pairs
DD (Dealing Desk) trading is suitable for people who want to trade even minor currency pairs .
The DD (Dealing Desk) system allows FX brokers to process investor orders, resulting in high liquidity for any currency pair.
On the other hand, because the NDD (Non-Dealing Desk) method involves direct transactions with the interbank market, it is difficult to execute trades on minor currency pairs with low trading volume
Therefore, for those considering trading minor currency pairs, we recommend trading using the DD (Dealing Desk) method
Frequently Asked Questions about NDD and DD Methods in Overseas Forex Trading
From here, we will explain in detail three frequently asked questions regarding the NDD (Non-Dealing Desk) and DD (Dealing Desk) methods used in overseas forex trading
If you're facing similar problems, please use this as a reference
What is a contract rejection?
A "rejection of order" that an order has been placed but has not been accepted by the broker and therefore has not been executed . In fact, "execution" simply means that the order has been completed.
For example, when an order is executed during a period of significant market fluctuation, the execution rate may differ significantly from the order rate
If the order rate and the execution rate differ significantly, it can lead to substantial losses for the broker, which is why the order may be rejected
Furthermore, the ability to correctly execute investors' orders is called "execution power."
Brokers with low execution speeds take a long time from order to execution, making it highly likely that you won't be able to trade at your desired rate
Order rejections are said to be common in domestic FX trading that employs the DD (Dealing Desk) system. However, low execution speed can lead to unfavorable situations for investors, such as "orders not being executed when desired" or "losses increasing because stop-loss orders cannot be cut."
Scalping, in particular, is highly susceptible to the impact of execution speed, so we recommend that those who engage in short-term trading use brokers with strong execution capabilities
Which is better, NDD or DD?
NDD (Non-Dealing Desk) and DD (Dealing Desk) methods have different priorities depending on your trading style and what you prioritize, so it's impossible to say definitively which is better
For those who prioritize safety and want to engage in short-term trading such as scalping, the NDD (No Dealing Desk) method is recommended.
Furthermore, for those who want to trade with narrow spreads, we recommend the DD (Dealing Desk) system.
Clearly define what aspects are most important to you when choosing an FX broker, and then compare them with the methods described in this article to determine which approach is right for you
Which is recommended, STP or ECN?
Whether STP or ECN is recommended depends on your trading style and what you prioritize
is recommended for those who want to trade without paying transaction fees
Among NDD (Non-Dealing Desk) methods, Communication Network) is recommended for those who want higher transparency and want to conduct a large volume of transactions
I recommend deciding on your trading method based on what you prioritize in your trading
Summary of NDD and DD methods for overseas forex trading
This article provided a detailed explanation of the differences, advantages, and disadvantages of NDD (Non-Dealing Desk) and DD (Dealing Desk) methods in overseas forex trading
Here's a summary of this article:
- The main difference between the NDD (Non-Dealing Desk) and DD (Dealing Desk) systems is whether or not the FX broker intervenes in the trading
- The NDD (Non-Dealing Desk) method involves direct transactions with the interbank market, resulting in "high transaction transparency."
- The DD (Dealing Desk) method generates revenue from customer losses, hence the term "narrow spread."
Most overseas forex brokers use the NDD (No Dealing Desk) system, while most domestic forex brokers use the DD (Dealing Desk) system
The differences between the NDD (Non-Dealing Desk) and DD (Dealing Desk) methods lie in transaction transparency, execution speed, and spreads
We recommend clearly defining what you prioritize in a transaction and then deciding on your trading method accordingly
