If you are searching and inquiring for a forex broker who is consistently on your side, with no concern of any kind, or conflict of interest, an ECN Forex broker is definitely going to be the right choice. It sounds uncomplicated when the right type of forex broker is chosen. In order for you to have the total details on how to make the right decision, this article will divulge on more detail.
WHAT DOES ECN STAND FOR?
ECN stands for Electronic Communication Network, and is an easy and fast way for traders to do their business. The network allows trading of financial products to take place outside of traditional exchanges. This is not a way of just trading foreign currencies, although this is its primary purpose alongside the trading of shares. Orders entered by market makers are distributed to third parties, and these orders can be executed in part of in full.
WHAT ARE THE BENEFITS OF USING THE BEST ECN BROKERS?
A lot of traders consider ECN Forex brokers as the best way to trade in the Forex markets. So let’s discuss what makes trading with the best ECN brokers such a popular pastime:
1. COMPLETE ANONYMITY:
This is possibly the main reason whymany traders choose to use the services of an ECN broker. There are so many brokers in the forex market and it is of utmost importance to be able to enjoy privacy and security. This is possible when trading, because they only act as the middle man, and not market makers. A trader who decides to trade can be rest assured that the trades they make are indistinguishable from all the others, and can’t be traced by anyone else in the market.
2. ENHANCED IMPLEMENTATION OF TRADES:
When trading with the help of an ECN broker, traders get to benefit from advanced execution of trades, as they are not dealing directly with the broker, but using their network to place their orders. They are not responsible for executing the orders merely for matching them to other market participants. This leads to far greater momentum, reliability and efficiency.
3. VARIABLE SPREADS:
An ECN Forex broker has no restriction over the bid/ask spread, therefore, unable to provide the same spread continuously. They offer variable spreads, which some traders consider as a benefit. Traders are given direct access to market prices, which fluctuate according to supply and demand, volatility and other conditions. This means they get to trade on tight bid/offer spreads.
There are also some drawbacks, which includes the following:
1. HUGE COST OF TRADING
This is possibly the biggest downside of ECN Forex trading. Essentially ECN brokers make their money by charging a commission on every trade. If you happen to be a high-volume trader, it could work out to be very expensive.
2. HIGH COMMISSION:
Traders have to pay high commissions for opening and closing their positions.
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.