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A Book vs B Book: What Are The Differences?


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Most forex traders are more worried about forex tips, leverage, and trading strategy rather than the execution of their orders when trading. Also, when a trade is made, traders are more worried about whether it generated profit or not. Among all these, A Book and B Book seem like mere technical jargon.

However, that is not so. Nowadays, more and more traders pay close attention to how their trades are booked or processed. There are several ways to execute a trade, and understanding these ways can be quite advantageous.

Let’s understand what A Book and B Book mean in forex trading.

A Book

Brokers that operate in the A Book model are regarded as ECN (Electronic Communication Network) or STP (Straight Through Processing). These brokers may also call themselves non-dealing desk brokers.

What does that mean?

It means that brokers that work under the A Book model pass your orders directly to the liquidity pool. A liquidity pool consists of many entities acting as a counterpart to the trades flowing out from your forex broker. However, the only information they have is the price level at which you have your buy or sell orders.

In the A Book model, the forex broker is not your counterparty and hence, when processing your orders, does not have a conflict of interest. An A Book broker will charge a commission on the trades called the round trip lot, which is a fee that you pay to open or close a position.

Advantages of the A Book brokers

The advantages of working with A Book brokers include:

· No conflict of interest

· Highly motivated to deliver the best trading conditions.

· Positive slippage.

· No re-quotes.

· Real market conditions with a bigger liquidity pool.

· Faster order execution at the best market conditions.

· Negative balance protection.

Disadvantages of the A Book brokers

The disadvantages of working with A Book brokers include:

· Variable spreads as the orders are processed directly to the liquidity pool.

· Higher trading fees in general.

· Negative slippage.

B Book

B Book brokers manage their clients’ orders internally. They go by different names such as market maker and fixed spread broker.

In the B Book model, the forex broker acts as your counterparty to your trades. Put simply, it means that when you place a buy order, your forex broker will be selling to you and vice versa. Your orders are not sent to the actual forex market.

Among many forex tips, one tip that many traders will give you is to not trust this type of broker. The main concern is that such brokers could take advantage of your trading history or trading pattern and make a profit off you. They can also set your account balances, orders and stop-loss levels. They can also manipulate your spreads, slow down your order execution speed, and refuse to fill your order by sending you requotes.

While there are concerns, there are also some benefits of B Book brokers. For starters, you can get guarantee fills on your trade. Since your broker acts as the market maker, you can get a good execution of orders even when liquidity is low.

Advantages of B Book brokers

The advantages of B Book brokers include:

· Instant order execution.

· Fixed or minimal spreads.

· Higher leverage.

· Low trading fees.

Disadvantages of B Book Brokers

The disadvantages of B Book brokers include:

· There is a distinct conflict of interest as your broker profits from your loss.

· The broker may manipulate the spreads and execution time.

· They may only enable negative slippage.

Forex tips on choosing the right broker

Your choice of broker depends on what you are looking for as a trader. For instance, if you live in a time zone where you begin work when the rest of the world is fast asleep, a B Book broker may be an ideal choice.

However, if you live in a timezone where the trading session is very active, you may find trading with an A Book broker a better solution.

When choosing a broker, another consideration is cost. Whether you choose an A Book broker or a B Book broker, you can’t escape costs such as commissions, spreads, and overnight swaps. You may want to compare both models in such a scenario to figure out the better solution for you.

As you can see, there are advantages and disadvantages to both the A Book and B Book models. One of the forex tips we recommend is to pay attention to the fee structure and other details to choose the right model for you.
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