These days ECN trading still seems vague and obscure to some people even though the first ECN technology (Electronic Communication Network) appeared long time ago, back in 1999. It was called Currenex then. This brand is well-known among ECN traders and it has taken the leading positions in the Forex industry for more than a dozen years of its existence. Nonetheless some people have wrong ideas of the ECN market and prefer staying away from the ECN brokers.
ECN Broker – Trust or Not to Trust?
Before delivering a verdict to the ECN broker, let’s make it clear who he really is and whether he can be relied on. Straight processing execution is the main feature that distinguishes ECN broker form a typical dealing center. Open orders go directly to the bank and get executed there without any intermediary, thus preventing the broker from gambling against the trader. Thus, ECN/STP gives an access to the real market with liquidity, supplied by the broker’s counterparty – major banks, financial organizations, hedging funds – or its partners.
It must be noted that ECN broker plays by the market rules. You make an order that is displayed in the “market depth” and seen by other traders, who in turn introduce their own orders. If your prices match, a deal is automatically complete. In fact, we come up with a mutual clearing system of high transparency. However, one should have enough experience in trading Forex prior to getting familiar with the ECN system in any case.
ECN Broker – Pros or Cons?
ECN/STP model may be scrutinized and strongly biased. However it’s undeniable that it has some real advantages over a typical Market Maker model. They can be boiled down to the following provisions:
- Lower spreads. ECN brokers profit on the commission from the trading volume. Thus their prosperity totally depends on traders’ success.
- Market execution. This advantage is especially appealing to scalping and intraday strategies.
- No re-quoting.
- Relatively easy access. Only major banks and hedging funds used to become the market participants. Now anyone with some relative deposit can easily enter the market.
However, there is no guarantee that your Market and Stop-Orders will be 100% executed with no slippage which can be either positive or negative. Constantly floating spreads may also be regarded a sort of disadvantage due to their tendency to grow in the news time. What is more, orders may be executed only partially, which is triggered by the shortage of liquidity at peaks of the market volatility.
Low software functionality for ECN/STP also used to be a stumbling block when compared with the popular Metatrader platform. It’s argued by the fact that a high speed of execution is exactly what ECN/STP focuses on rather than a technical analysis. Today it’s no longer a problem. A compromise has been reached by the company FXOpen who has successfully implemented a new solution combining the features of both the innovative MT4 platform and the ECN model.
ECN Broker – Who Benefits?
ECN environment is especially comfortable for scalpers and algotraders. It’s also welcoming to those who can respond quickly and adequately to unpredictable changes of the highly volatile market. At the moment ECN is the most progressive system associated with transparent operations and a free choice of liquidity providers.
Only a few companies have adjusted their MT4 platforms to secure a relatively easy access to the true ECN trading. FXOpen can be distinguished from the list of those few. Judging by the customers’ feedback, the broker holds one of the leading positions due to its top-up services and favorable trading terms. Apart from low spreads, the company gives a chance to test demo trading before plugging into the real money market. Thus, possessing all the features and characteristics of a typical ECN broker, the company seeks to break the stereotypes, hampering its advance, and strives to create a good image of ECN brokerage as a whole.