Electronic Communications Network otherwise known as ECN has experienced an increase in the total number of brokers who are interested in their services. Brokers who have opened their doors to ECN are also referred to as "STP brokers" (Straight through processing) or "no dealing brokers" (NDD). Regardless of the name, the ultimate aim is to allow clients trade to be executed by matching them with other clients or a 3rd party who wish to take other sides of the trades.
Best ECN brokers in Forex normally charge lower spread in comparison with their other counterparts in the market. The ECN brokers compensate by partially charging additional commissions on trade entities and exits which can be calculated as a fixed percentage of the entire value of the trade. Regardless of these fees, the combination of the spread and commission is usually at least a little lower than the spread which is charged on a similar trade by the non-ECN brokers.
What makes ECN brokers more attractive to traders is the combination of lack of conflict of interest in addition to the typically low cost of trading. Apart from these, there are other factors that define the Best ECN brokers in Forex.
Before you choose the best ECN broker in the Forex market, here are some factors that need to be taken into consideration.
The best ECN brokers in Forex usually require a minimum deposit. A few insist on the minimum trade sizes which are as high as 1 mini-lot instead of the 1 micro-lot (one-tenth of a mini-lot) which is now regarded as a standard within the Forex industry.
Most ECN brokers normally offer an excellent execution speed and spreads are oftentimes are non-existent or inverted for a second or two. During the period of very low liquidity, the execution may be seriously delayed since the market makers may take to trade if no client wants it.
When putting commission into consideration, this is a very attractive feature. Spread can, however, widen dramatically and sometimes be beyond what the market maker brokers will be offering at the same time. Spreads vary since they are based on the market supply and demand.
HOW TO CHOOSE THE BEST ECN BROKERS IN FOREX
There is no difference from choosing the best ECN broker in Forex from other brokers. Some of the factors to be watched out for before determining the suitability of the best ECN brokers in Forex include but are not limited to;
The best ECN broker should be one that you will feel comfortable with based on your location or country. Factors to be considered under this should include language, and legal systems.
b. REGULATION AND SAFETY OF DEPOSITS
If you are only interested in depositing a relatively small amount, this factor may not be important to you. While some countries have a well-developed culture of financial regulation enforcement which is reassuring, others may not be so blessed with such a financial system. You should also put into consideration whether the ECN offers any form of protection on your deposits or not.
c. COST OF TRADING
Spreads should be considered before opening accounts. One of the main challenges with this is that most brokers have been known to make conditions in their demo accounts.
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.