Have you ever learned about the means of doing retail forex trading? It is generally done through two mediums; market makers or ECNs. ECN stands for electronic communications network. It is famous among the forex traders and most of them prefer ECN brokers over market makers for several characterized benefits gained from it.
What is ECN?
ECN brokers work as link. They are considered as a bridge which connects forex market participants straight to each other. This eradicates the requirement for a dealing desk. Forex ECN brokers attain the values or prices from various market participants including banks, market makers and other traders who are the network affiliates. They line up the best bids and prices on their dealing platforms.
There are several benefits of using ECN brokers for retail forex trading. Let’s have a look at them.
- Trading with secrecy- ECN brokerage firms often do the trading in anonymity. This means that the name of the traders is not mentioned at any stage of trading. This permits traders to trade on neutral prices. The traders who are willing to accomplish large trader find it beneficial to be able to execute trade in anonymous manner. It is crucial as it enables them to trade without disclosing their strategies and/or present market status which can have impact on market prices.
- Finest prices- As mentioned earlier, ECN brokers gather price quotes from various market participants and hence can provide you with close-fitting bids or ask prices. You cannot get such bids from any other type of forex brokerage organizations. One more important thing is ECNs do not have their hand in settling the prices. This reduces the certain risk of price manipulation.
- No fixed spreads- Market makers have control over the bid prices, while ECN brokers don’t have any control over them. Hence, they are not able to deliver fixed spread all the times. Along the very live trading periods, one can get very less or no spread at all, particularly for tremendously liquid currency combines like majors. A close-fitting spread is pursued by many of the market participants; especially day traders. Why? It is because it facilitates them to fill up their orders at their own desired prices.
- Better access to market- Forex ECN brokers have a better to access to the forex trading market. ECNs not only work with retail forex traders but also pass on bids and or ask prices from plentiful organizational market makers like banks, finance companies and some other large institutions.
- Immediate trading- If you choose to use ECN broker, it makes it easier for you to trade immediately. Being a client of ECN, you get an opportunity to enjoy consistent live streaming of the finest executable prices and with that you gain instant confirmation of trades as they are dealt. As mentioned earlier, there is no middleman business in trading with ECN brokers, so re-quoting is most unlikely.
- They don’t trade against you- Some market makers are often accused of trading against their own clients. This is not the case with ECN brokers. They directly match market participants and hence there is no chance of them trading against their clients. The job of the ECN broker is just to pass your orders to financial institute or some other client on transactions’ opposite end.
There are several ECNs present and large number of traders is placing their orders through them. The preference traders give forex ECN brokers can be justified by the above-mentioned benefits including closely-fitting spreads and finest market access. So, if you are willing to jump into forex trading, it is highly referred to contact ECN broken than relying on market makers to achieve more profits.