10 Points You Must Realize Before You Opt In For
10 Points You Must Realize Before You Opt In For An ECN Account
In forex market, two types of brokers mainly exist; one of them is called the market makers and the second one is ECN broker. ECN stands for Electronic Communication Network. Simply we can say that an ECN forex broker is a financial expert who provides its clients direct access to other participants in the market. ECN is a type of computer software that facilitates the trading outside the market so ECN broker only acts as a middle man between your trades, not as market maker.Following are the some positive and negative points of using an ECN broker. These points will help you in taking right decision in choosing a forex broker.Positive points of using an ECN broker:A number of benefits that you can get by using an ECN broker are:Privacy of your trades:The role of an ECN broker in trades is only as a middleman. So when you make a trade on ECN network your privacy is completely secured and your account cannot be identified and traced back to you. You can protect your trade strategy by using an ECN broker because you are using the name of broker for your trades.Become your own market maker:Using an ECN broker you have a liberty to set your spread so you can set your limits himself. It also ensures you to get some extra profit because it compares your bids with the other participants. Also ECN brokers allow you to place limits and stop orders without any restrictions and limitations. So you can act as your own market maker.Trade continuously:ECN allows you to trade during news and Events. Continuous trading increase the price volatility and at ECN, trading always remain continuous, so you can get the benefit of price volatility. Enhance the execution of orders:It is important to know that you are not trading with ECN, but you are placing your order by using ECN. The ECN is only matching your order with the other market participant on the ECN as quickly as possible. With an ECN forex broker, you are able to see several of the best quotes being offered at a time in a currency pair by market participants. Through this you can increase the execution of orders.Increase Price volatility:In ECN prices are not constant and change can occur too quickly. This can increase the price volatility. Price volatility helps the scalpers and the short term traders to earn a quick profit. ECN brokers are fit for scalpers.High liquidity:ECN has eliminated the geographical distances, now different parties can trade across the world without any geographical limits. ECN brings many buyers and seller at the same spot, through this the liquidity increases which also increase the market efficiency.Negative points of using an ECN broker:Some potential disadvantages of using ECN brokers are:High commission:ECN charged commission on every trade. Mostly in ECN the spread is low so sometimes the commission is more than gain which causes ultimate loss to trader.High capital:ECN allows you to act as a market maker. So you need high capital to influence the market indicators. ECN is not a perfect place for small investors and traders.Dishonest market makers:Every person is acting as his market maker on ECN. So there are chances that some dishonest persons can easily influence the market by introducing a great volume of trade. Some people are also giving deceive to others by showing them the ECN broker but in fact they are not.Conclusion:An ECN forex broker is a financial expert who acts as middle man between buyer and seller in their trade. The advantages of using ECN forex brokers are low spread, greater volatility and high privacy. High commission and capital are the big disadvantages of using an ECN broker. Check out your trading strategy and financial status, then decide properly.
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Decide to opt in for an ECN account? Look at my suggestion for a tight spread ECN broker at another look at FXOpen. The tight spread in an ECN account helps you to be an effective scalper. Look at more about effective scalping in scalping strategies.