Your Forex broker is a Forex provider and an investment partner that you open an account with in order to trade the Forex market. The traditional definition of a forex broker is one who puts buyers and sellers together for a commission or fee.  Many forex brokers make their money by charging you a spread, the difference between the buying and selling prices for a currency pair.

There are two major types of forex brokers investors should be aware of. There are market makers and Electronics Communications Network (ECN) brokers, of which both have their benefits and contrary points that make them both very unique.

The forex market maker in essence is a bank or brokerage company that is always available to trade with a firm bid and ask price. Conveniently, when the investor chooses to buy and sell a pair of currencies, the market maker will purchase from and sell to the investor, even if there is no buyer or seller readily available. They are actually making a market to buy or sell the currencies in.

Forex market makers make certain that the market remains serviceable and that the currencies in it will always obtain the market rate. Market makers update their prices at intervals of at least 30 seconds and proceed to trade if requested. They have a duty to carry out obligations despite the economic situation being favorable or unfavorable, causing them to sometimes lose profit.
There are two major types of market makers, which represents a different level in the Forex market. Some levels are very high and have direct access to the Forex market while others are very distant and have very little connection to the Forex market.

Retail Market Maker

These types of brokers represent the vast majority of online Forex dealers. They differ in many respects and offer a wide range of services. Most traders will use a retail market maker. They take different approaches in their connection to the Forex market. Some are directly connected while others deal with an intermediary for access to the Forex market.
Retail market makers are suitable for beginning Forex traders, but they should consider the services offered before making a selection. Retail forex companies are glorified bucket shops and are often referred to as market makers, since they essentially create their own trading markets.  Spreads are arbitrarily decided, trades are made against you, and profits are distributed at the broker’s discretion.  Retail forex companies are attractive to newcomers and those short on cash because they don’t require large investments.  If you don’t mind running the risk of having your profits disappear on a whim, then retail forex companies are a good place to learn the ins and outs of forex trading.  They allow you to demo trade on their platforms until you know what you’re doing and give you unusually high leverage. 

Institutional Market Maker

These types of broker are very closely aligned with the Forex market. They have a more direct connection than most Retail Market Makers. They are very suitable for beginning traders, but usually require large amounts of money for direct access to the interbank market.

ECN forex brokers do not typically have a dealing desk. They provide a networking core comprised of other market makers and financial institutions. They make it possible for traders to enter bids into trading software or a location outside the market spreads. This increases the chances of better spreads.

Any order by the trader is sent to the best bid offer available. The spread range is usually much better than that made by a market maker. ECN forex brokers do charge commission fees for obtaining such good spreads which do vary across the board.

This is how the forex broker actually makes their money since the spread they offer is so extremely low. This doesn't do much damage to the trader's pockets considering they are able to benefit by getting in at a much better price. ECN brokers simply match your offer and send it to the best asking price in the computer network.
As ECN brokers are institutional brokers. They are directly connected to the Forex market. This consists of a consortium of approximately 200 banks. It also represents nearly half of all Forex trading. This is not suitable for beginning traders since only banks are allowed to participate. If any broker claims to have direct access to the Interbank market, they are committing a fraud since only banks have this type of access.

Both brokers have their pros and cons. The prices market makers offer are less volatile but you do sometimes risk the possibility of a market maker manipulating prices and taking position against you. Market makers also may not make themselves available around the clock to take advantage of high volatility prices. With an ECN broker, you may not get the best available news related to the market but you may get the best bidding price in most instances. Both should be tested to determine your preference.