A Book or B Book in Forex Trading? Which is Better & Why?

We seldom worry about the growth of coffee beans or the milking of cows, all that concerns us is the quality of the coffee we drink. Forex trading follows a similar analogy. As a trader, you don't think about the underlying brokerage processes, only about the smooth conduction of currency exchanges. Traders don't feel the need to understand the functions going in the background, but is such a mentality beneficial?
 

A books, B books - these must be sounding unnecessary to most Forex players. However, these are substantial elements that will help see the bigger picture in a much clearer fashion. A very simple reason is that as a Forex trader, you should know how your trade is executed. Since the trading majority is ever-keen on improving strategies and analyzing trends, not much focus can be driven towards seeing how the trade is made by the broker.
 

Some basic level of transparency should be strived for. Else, as you start making increasing profits, you will end up shelling just as much, if not more, too fishy brokerage processes. Fortunately, however, traders are beginning to see the importance of being aware of what goes on once their trades are placed. 

A Book or B Book in Forex Trading in Pakistan

A Book Trading:
 

An A book isn't a book in case you were wondering, it is a trading model (Straight Through Processing) aimed at trading without having the broker as the counterparty. When trading with this model, your order goes directly to the liquidity pool - here there are a number of bodies to serve as your trade's counterpart. A big chunk of Forex traders don't like trading with their broker as their counterparty since there isn't a conflict of interest.
 

Despite there being a transparent brokerage method available, why do the majority of Forex traders go for the more dubious ones? This is because a book brokers tend to charge higher spreads in most cases. Spreads can be tight when availing the brokerage provided by a book brokers, more so when trading exotic pairs. The problem with this isn't just the expense, it is the risk held by open positions that are the bigger issue.
 

B Book Trading:
 

The opposite of A book Forex trading, B book trading essentially allows you to avail brokerage where your broker is the trade counterparty. What this basically means is that you will sell to and buy from your broker. Doing so puts you in a position where your broker is more or less aware of your trading styles, the information of which can be used against you.
 

What's beneficial, however, is that the spreads are fixed in this type of brokerage. This means that irrespective of market hours, you will be paying the same amount to your broker for the trades. Another advantage of B book Forex trading is the guarantee of fills. Be it liquid markets or completely stagnant ones, with your broker acting as the market maker, you can bank on the fact that a good number of orders will come by.
 

Hybrid Model:
 

A subtly advantageous mix of A and B, this Forex trading model is of incredible benefit to the broker. By taking selective elements from either style, the hybrid model essentially allows the broker to decide which style of brokerage to follow with a particular trader. This means that depending on their decision, you can be subjected to STP brokerage or fixed spreads, and you won't be able to find out which! Traders who are working with a large capital are typically given the B book brokerage since this is more advantageous to the broker.
 

What's The Right Type For You?
 

When choosing a good brokerage solution, first importance has to be given to your expectations from a trade. If you are trading on stable grounds with little to no volatility, a brokerage with fixed spreads will work perfectly for you. Likewise, another aspect to be kept in mind is the trading expense borne; commissions and spreads aren't in your control but are mandatory. Sign up for services that charge honestly and don't rob you in broad daylight. 
 

How Do I Find The Right Broker?
 

Start off by going through user reviews. One of the best ways to study a broker's efficiency is by filtering out reviews. Be aware of the fact that some reviews, good or bad, are going to be fake! So having just one measure will not suffice. Take a demo test from the broker and avail their live assistance - this will give a clear idea of whether or not the broker is sincere in his/her approach.
 

Be it A book or B book, WesternFX strives to always be in your good books by providing you with high-quality brokerage! Of the various Forex brokers in Pakistan, we continue to be the crowd favorite. How? By keeping our promises and delivering excellence. Try a demo with us and see for yourself, call us!