Overseas FX broker XM has DD and NDD methods, but what are these? I will explain the difference between transactions. This article is for those who are thinking of starting XMTrading, or those who have already started. XMTrading 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 is an abbreviation for “Dealing Disk,” in which a dealer intervenes between the trader and the interbank. It is up to the dealer to decide whether or not to send your order to the interbank. With the DD method, the more the trader loses, the more profit the FX company makes. There are rumors that FX companies using the DD method intentionally create a system where traders cannot win against others in the USD/JPY or EUR/USD, but this is also said to be a lie.
What is the NDD method?
The NDD method is different, and stands for “Non Dealing Disk,” and there is no dealer between the trader and the interbank. In other words, all of the trader’s orders flow to the interbank. Because of this relationship, the company can only make a large profit from the spread. The NDD method offers a transparent trading environment that eliminates the possibility of contract rejection and slippage, in exchange for the wide spread. I recommend it because you can invest in various types of products on average in a fluctuating market and make a lot of money at the same time.
Difference between DD method and NDD method
DD method with narrow spreads/opaque transactions. NDD method with wide spreads/transparent transactions. Which is better depends on personal opinion. DD method is often used when there is fraud in the organization. Personally, I think NDD method is more transparent. A big point for investors is that there is detailed and transparent information about capital losses even if the order is executed. For reference, choose an exchange by taking into account position holding, swaps, and even costs. Most exchanges do not require margin calls, so there is essentially no risk of debt, so it is safe.
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Disadvantages of the NDD method
XMTrading uses the NDD method, but this method is not foolproof. Of course, there are risks. XM has a good system and is recommended with a high contract power, but please be aware of the following points. There are the following points to note when operating. Be aware of the disadvantages of NDD at XM. Compared to domestic FX companies, non-dealing disks affect investments in leverage, spreads, support, etc. Be careful of your methods so you don’t lose. Those who are using EA should be careful.
width of the spread
The disadvantage of XM adopting the NDD method is the wide spread. It can be said that XM is not suitable for scalping. However, in the case of XM, there are courses specialized for scalping such as KIWAMI Extreme Account and Zero Account, so it is difficult to say anything. Recently, on the contrary, the movement has become a little faster, so it is easier to make a profit. Be careful when using it, such as intentionally separating strategies for new trades.
slippage
Since the NDD method sends trader orders to the interbank market, slippage is more likely to occur during times of low volume. You can set the allowable amount for slippage, so if you are planning to do short-term or automated trading, set it in advance. The basic approach to implementation is that it increases your burden, which is a cause for concern. Unlike other companies, you need to be careful when placing orders from a smartphone, etc.
Advantages of using the NDD method
XMTrading uses the NDD method, but of course there are benefits. There are not only negative aspects, but also positive aspects in terms of customer management. It is also mentioned in the official FAQs. From what has been announced so far, it is possible to trade quickly and effectively at high prices, and problems such as requotes and stop hunting are less likely to occur depending on the purpose and content. Although it depends on the intention, it is almost always quite high leverage, so if you look closely at the charts, it is very easy for new traders to win even with a small amount. The service has been improved and is a must-see.
Transaction transparency
The biggest advantage of the NDD method is fairness and transparency. Since there is no intervention in between, traders have the advantage of being able to trade comfortably as they eliminate the possibility of fraudulent manipulation. Malicious Forex companies always have a setting that will force you to cut your losses, which can be stressful, but it is highly transparent, so if the timing is right, you can make money.
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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 using this ECN method, and the STP method is automatically adopted for micro and standard accounts. Please check it out as it is an important explanation. Once you gain knowledge and experience and become able to truly win, you will be able to trade advantageously.
How the STP method works
In the STP method (Straight Through Processing), when an individual investor opens a trading platform such as MT4, a broker obtains price information from a financial institution that has interbank access called a “cover destination” and adds a certain spread to the broker. We present the price of currency pairs to individual investors. 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 (Electronic Communications Network) 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.
It’s important to trade safely
In the end, the important thing is to operate the lot safely without raising the price. Check your margin and trade comfortably. The operating company has a wealth of calculation tools available on its official website, so please take advantage of them. Since we offer many financial products and have obtained multiple licenses from the Financial Services Agency, we also use zero cuts. It’s a reliable company, so you won’t have to deal with it unfavorably.
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