Everything You Must Know Before Using Any ECN Brokerage

You usually hear ECN brokers boasting regarding their super-low spread? Is it just that great? Discover the fact concerning ECN broker before you use one of them.

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. This kind of interaction is very beneficial to Forex traders. This way, these brokers offers special marketplace allowing different participants to trade against each other directly. Rather than accepting direct interaction between different clients' order, ECN Forex Broker also shares several features common to other types of brokers.

ECN Forex Broker Features

Market Display Depth

This feature does not allow the dealer platforms to display the 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. He can also use the information provided for his 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. During economic releases and other unusual market volatility, the bid/offer spreads increases.

Client-To-Bank Trading

ECN Forex Broker allows client-to-bank trading on the FXCC ECN so you can trade instantly using prices which are streamed by leading FX banks.

Benefits Of Using ECN Broker

Anonymity Of Executed Trades

These types of forex brokers use anonymous transactions when buying and selling. They ensure that the client's trades and account identity are not shared out so the trader cannot be traced back. Most traders like this protection of privacy hence would choose ECN brokers.

A Chance To Make Your Own Market

With the ECN Forex Broker you have everything it takes to be your own market maker. You can ultimately make your own market or simply act as a market maker when using these brokers. These brokers allow traders to place orders exactly between the bids and ask spread.

Great Price Volatility

Prices used on ECN are not fixed. You can experience several large price swings in a short time especially during volatile trading periods. 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 provided is focused on effectively matching orders while other market participants hold the opposite side.

News and Event Trading

This type of trading is very ideal for news and event trading. News and event trading is very useful when the market experiences great volatility. 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 will continuously display varying spreads which depends solely on actual trade volumes. Spreads also depends on the available market liquidity enough to support 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.

Individuals with little credit can greatly participate in the Forex market and make profits.

ECNs provide currency prices from different market participants like banks and market makers

They use the best bid/ask quotes they can afford to offer basing on these prices

They show decreased risks of price manipulation since they don't determine prices

Cons

The exchange rate of any currency pair can differ significantly because the system is decentralized

They enforce forex traders to pay commissions for each transaction

They use variable spreads between bid/ask prices so calculating stops in advance is harder

Most ECN Forex Broker use trading platforms which are less user-friendly

Conclusion

ECN Forex Brokers are the best a trader who wants to be successful with Forex trading should choose because they offer great connectivity features. 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 major advantage of using ECN Forex Broker is the ability to start with little capital.

Every investor can gains advantage from low spread and a correct ECN account accompanied with DOM data is the easiest method to achieve it. Check out my top recommended ECN broker in Switzerland at Dukascopy forex broker. In case being not-regulated doesn't bother you, take a look at another good recommended ECN broker on FXOpen review.