ECN brokers (Electronic Communication Network brokers) are among the fastest emerging brokerages in the Forex world. In short, ECN brokers provide a marketplace where traders and market makers can place competing bids against each other.
Many traders choose to trade with ECN forex brokers for a number of reasons. For example, the deep liquidity access they get, the lack of re-quotes, the improved, faster execution. Most noteworthy, the spreads that are significantly lower than these of a market maker.
Here is a list of brokers who provide ECN Forex accounts.
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Advantages and Disadvantages of ECN Forex Brokers
ECN Forex Brokers are the foreign exchange financial experts who use the electronic communications networks (ECNs). They are providing their clients direct access to the other participants in the currency markets. They match trades only between the market participants and not trade against their clients. These type of brokers charge their clients a fixed commission per transaction because the ECN spreads are narrower than what’s used by the everyday broker.
The Advantages of ECN Forex Brokers
ECNs allow the investors to trade outside of the traditional trading hours since it offers flexibility and wider availability. ECNs are typically attractive for the investors who are interested in making a larger transaction and who cannot be actively involved during normal market times.
The genuine ECN forex broker will not trade its client. Hence the ask prices/bid are derived from several market sources, you can usually get better ask prices/bid. You can trade on the prices that have very little to no spread at certain times and the prices may be more volatile. Furthermore, as the client is able to offer a price between the bid and ask. You can take on the role as a market maker to the other trades on the ECN, if you think about it.
The Disadvantages of ECN Forex Brokers
The investors who are less experienced may find difficulties in using the trading platform of ECN Forex Brokers since it tends to be less user-friendly. Calculating stop-loss and breakeven points in pips in advance may be more difficult due to the variable spreads between the bid and ask prices.
Many of these types of brokers do not offer integrated charting and news feed. The traders will have to pay commissions for each transaction may be too much for some small traders.
Benefits of ECN forex broker
- For ECN broker, they have not fixed the spread for the trading, so the buying and selling cost changed as per the market situation.
- Fixed spread forex brokers have a higher cost of trading than a ECN broker.
- In addition, to open an account with an ECN forex broker is usually starting from 5000 U.S. dollars, with the headquarters of the company of an ECN brokerage mostly in the U.S. or Britain.
- ECN market allows for versatility in trading by handling orders of any size.
- ECN brokers will not bid against you.
- ECN broker will charge a fee or commission for their online services and it would be well worth the time to have a broker acting for you.