A Forex broker is a company that provides traders with access to a platform that allows them to buy and sell foreign currencies. Forex brokers earn a profit by charging traders a spread (the difference between the bid and ask price of a currency) or by charging a commission for each transaction.

There are mainly 2 types of Forex brokers:

Dealing Desk (DD) Brokers - A Dealing Desk (DD) broker is a type of forex broker that operates as a market maker. This means they provide their clients with bid and ask prices for currency pairs and make money from the difference between these prices, known as the spread. DD brokers create their own market by providing quotes, rather than relying on an external source of liquidity. As a result, they are able to offer their clients fixed spreads and instant execution. However, some traders view DD brokers as counterparty to their trades and may have concerns about the broker's potential to manipulate prices or engage in stop loss hunting.

No Dealing Desk (NDD) Brokers - No Dealing Desk (NDD) brokers are a type of forex broker that act as intermediaries between clients. They match trades between buyers and sellers, rather than acting as market makers. NDD brokers do not quote bid and ask prices themselves, but instead connect their clients to a pool of liquidity providers, such as banks and other financial institutions. Because NDD brokers do not take the other side of their clients' trades, they do not make money from the spread. Instead, they generate revenue by charging commissions or a markup on the spread offered by their liquidity providers. NDD brokers are considered to be more transparent than DD brokers, as they do not have the same conflict of interest. However, NDD brokers may charge higher commissions and offer wider spreads, as they do not have the ability to control the spread themselves.

Other classifications of Forex brokers include ECN, STP, and Hybrid brokers.

ECN, STP, and Hybrid are sub-types of No Dealing Desk (NDD) Forex brokers. Here's an explanation of each:

ECN (Electronic Communication Network) Brokers - Electronic Communication Network (ECN) brokers are a type of forex broker that provide direct access to the interbank market. An ECN broker acts as a bridge between individual traders and a network of banks, financial institutions, and other market participants, who provide liquidity. By connecting their clients directly to the interbank market, ECN brokers allow traders to trade directly with liquidity providers, without the intervention of a dealing desk. This results in highly competitive spreads, as the best bid and ask prices from multiple liquidity providers are aggregated and displayed to clients in real-time. ECN brokers generally charge a commission for their services and do not profit from the spread. ECN brokers are the most transparent and fair type of forex broker, as they have no conflict of interest and execute trades at the best available prices. However, ECN brokers may require higher minimum deposit requirements and may not offer the same level of customer support as DD or NDD brokers.

STP (Straight Through Processing) Brokers - Straight Through Processing (STP) brokers are a type of forex broker that act as intermediaries, routing trades to liquidity providers. STP brokers do not act as market makers or take the other side of their clients' trades. Instead, they match trades between buyers and sellers and send the trade details to liquidity providers for execution. STP brokers make money by adding a markup to the spread offered by their liquidity providers, or by charging a commission on each trade. By routing trades directly to liquidity providers, STP brokers offer their clients access to competitive bid and ask prices, without the intervention of a dealing desk. However, like NDD brokers, STP brokers may charge higher commissions and offer wider spreads than DD brokers. The term "STP broker" is sometimes used interchangeably with "NDD broker," as both types of brokers operate as intermediaries and do not act as market makers. However, there are subtle differences between NDD and STP brokers in terms of the way they route trades and make money.

Hybrid Brokers - Hybrid brokers are a type of forex broker that combine elements of both Electronic Communication Network (ECN) and Dealing Desk (DD) brokers. Hybrid brokers offer their clients direct access to liquidity providers and sometimes act as market makers. This allows them to offer a mix of advantages from both ECN and DD brokers. On one hand, hybrid brokers can provide highly competitive bid and ask prices from multiple liquidity providers, similar to ECN brokers. On the other hand, they can also act as market makers, offering their clients fixed spreads and instant execution, similar to DD brokers. Hybrid brokers may generate revenue through a combination of spread markup, commissions, and other fees. The exact model of a hybrid broker depends on the individual broker and may vary widely. Some hybrid brokers offer ECN-style trading for large traders and market maker-style trading for smaller traders, while others may offer a mix of ECN and DD trading depending on the size of the trade. Hybrid brokers are considered a compromise between ECN and DD brokers and may offer a mix of advantages and disadvantages from both types of brokers.

It's important to note that not all Forex brokers clearly state which type of brokerage model they use, and some may use a combination of models. Traders should research and understand a broker's business model before choosing to trade with them.