What You Have To Know Before Working With Any Ecn Brokerage
In full, ECN means Electronic Communications Network
. ECN Forex broker is therefore a special type of forex broker that additionally allow several different clients' orders to interact with each other. The interaction is very significant and has proved very beneficial for most forex traders. This way, these brokers offers special marketplace allowing different participants to trade against each other directly. Apart from allowing different clients' orders to interact, the ECN Forex Broker shares other features in common with other type's Forex of brokers.
Features Of ECN Forex Broker
Market Display Depth
Dealer platforms are not allowed to display any form of available market liquidity. The FXCC is only allowed to show volumes which are available for the bid and offer at their best price.
Anonymity
They allow anonymity on dealer platforms. The dealer can know your exact trading style and tactics, and open positions. The dealer is also allowed to use this information for personal advantage.
Allowance To Trade During Economic Releases
This actually allows all traders irrespective if the size of their trade to execute trades and also place new orders within key economic releases. Usually bid/offer spreads gets wider during economic releases, and during unusual market volatility.
Client-To-Bank Trading
Client-to-bank trading is allowed by ECN Forex Broker especially on the FXCC ECN enabling the trader to execute trade instantly by using prices already streamed FX banks.
Benefits Of Using ECN Broker
Anonymity Of Executed Trades
These types of forex brokers use anonymous transactions when buying and selling. Trading through ECN ensures that all your trades and account identity not released hence you cannot be traced. Most trade choose ECN brokers because of this protection of privacy.
A Chance To Make Your Own Market
With the ECN Forex Broker you have everything it takes to be your own market maker. You have a chance to make your market and act as a market maker. They allow you to place an order just between the bids and ask spread.
High price volatility
Prices used on ECN are not fixed. A trader will therefore experience many large price swings just within a short period mostly when trading becomes more volatile. You can claim quick large profits during these volatile times if you are a scalpers or short term trader.
Better Execution Of Trades
They are designed to provide the most improved and advanced trades execution. Understand that you're not in any case trading directly with your ECN broker but simply using the network that they provide. The network is solely focused on matching up all the orders while the opposite side is held by a different market participant.
News And Event Trading
This type of trading is very ideal for news and event trading. This is very useful when the market is become extremely volatile. You have access to many institutional liquidity providers in the market. This also allows you to get orders successfully filled even in very volatile situations.
You Are Not Tied To Spreads During Highly Active Trading Periods
An ECN broker does not sue fixed spreads hence you don't get tied during active trading periods. Every currency pair display continuously varying spread depending on the actual volume traded. This also depends on the available liquidity that can effectively support the trade. This happens because ECN broker use pricing feeds from varying multiple institutional markets.
Pros and Cons of ECN Forex Broker
Pros
All the transaction are carried out over-the-counter (OTC) worldwide.
It allows individuals with little credit to participate in the forex market
ECN brokers use currency prices from different varying market participants such as banks and market makers.
They use only the best bid/ask quotes based on prices which they can afford to offer.
There are decreased risks associated with price manipulation because they are not the price determinants.
Cons
The exchange rate of any currency pair can differ significantly because the system is decentralized
Forex traders are enforced to pay all the commission for each and every transaction.
It is harder to calculate stops in advance because they use variable spreads between bid/ask prices.
Most trading platforms used by ECN Forex Broker are less user-friendly
Conclusion
Due to their great connectivity features, ECN Forex Brokers are the best choice that you should choose if you want to be successful with forex trading. In addition to the free interaction between clients' orders, they offer other wealth of features developed to make the process of trading hassle-free. The best part with ECN Forex Broker is that you can start with little capital.
by: Ownen Moore
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