This is a very important topic for you as a trader. There are two, radically different Brokerage firms out there. Market Makers and STP Brokers. Some firms may even choose to be both, and that is also a problem for you.
A Market Maker will offer you unbelievably low spreads. For example EURUSD 0.5 The reason for this incredibly low spread is that they do not make money from the spread, they make money from your loss. And they have the tools to guarantee that loss. What tools? Well, they can create “Artificial Slippage” which means your order will be purposely delayed in terms of getting filled and you will not receive the profits you could have. They can and will monitor your Stop Loss (SL) and Take Profit (TP) where a spike will be created so as to close you out (Also known as Stop Loss Hunting), or the Take Profit never be reached, as “Artificial Gaps” are purposely created. Additionally, a Market Maker does not allow Hedging, and has a vested interest for you to loose, so any news the announce, any Support or Resistance lines they may tell you to set are literally there to transfer funds from your Trading Account to their Bank Account.
On the other hand, an STP broker (such as BlackWell Global, through ForexScream) is a broker than does not own any of the Liquidity that you are trading with. They are there to receive the best Bid and Ask price from the Liquidity providers to you. This type of Broker makes money from the Spread and can actually sleep at night.
Another one below:
Now, let’s have a look at BlackWell Global. My partner in providing True STP Trading to the people:
Page 3 says it all.