Forex traders usually face numerous problems, like the broker’s reliability, order execution etc. These problems force traders into becoming clients of ECN-brokers.
ECN stands for Electronic Communications Network. I guess there is no point in explaining here what ECN is. For more information, you can read the Electronic Communication Network article published in Wikipedia. In short, the network unites all the market participants – traders, banks, investment funds. This is some kind of a single trading environment where a trader’s order is executed through finding the opposite order placed by another trader.
Let’s find out what competitive edge ECN-brokers have over other brokers and how to choose a reliable ECN-broker. In order to do that, has started a separate rating called “Best ECN-Broker 2012”.
ECN-Broker: Advantages
According to Eugene Olkhovsky, ’s leading Canadian expert in financial markets, there are some major differences between an ECN-broker and a conventional one.
1. Direct execution of orders. ECN-brokers don’t act as counteragents. They make money by charging their clients with commissions and fees for executing orders through their liquidity suppliers (major banks).
2. Direct access to the interbank. Unlike ECN-brokers, If a trader sells a conventional broker buys from him, if a trader buys a the broker sells to him. In order to hedge an order it can use its liquidity supplier. It can also hedge an order without transferring it to the interbank. In fact, conventional traders do not actually provide their clients with a true access to the interbank. Such brokers usually forbid scalping because they fail to hedge a lot of quick trades.
3. No scam. An ECN-broker cannot cheat because it doesn’t directly participate in the execution of orders. ECN-brokers are not interested in their client’s losses. They charge fees for transferring their orders to liquidity suppliers.
The bottom line: ECN-trading is suitable for professional traders, especially for scalpers and other intensive traders.
ECN-Broker: Disadvantages
Firstly, it’s about considerable trading capital and floating spreads: A trader needs a lot of money to start trading with an ENC-broker. Moreover, during volatile markets (especially on major news) spreads can widen up to 10-20 or more pips.
Secondly, an ECN-broker cannot guarantee that your stop-loss order will be executed at a predetermined price simply because the broker can fail to find an opposite order to make a deal at the very moment the stop-loss order is to be executed.
ECN-trading is getting more and more popular with all kinds of traders. It can guarantee that orders will be executed at a market price, not at a price set by the broker, thus excluding any chances of cheating.
How To Pick A Reliable ECN-Broker?
Advertisement campaigns are biased (so are some shady posts on various internet forums). The best way to find out the truth is to rely on the opinion of an army of skilled traders.
That is why decided to let the internet trading community an opportunity to participate in an open voting in order to choose World’s Best ECN-Broker 2012.
To do that, please, follow the link.
The chart is composed of those ECN-brokers that are included in ’s rating of FX brokers .
On the right you can see 2 buttons (the first one is FOR, the 2nd one is AGAINST). On the left you can see the list of brokers and the amount of rating points they already have. Once you press any of the buttons, your vote is taken into account and influences the broker’s standing.
Market Leader and would appreciate if you could participate in a survey. Please, visit the Academy’s forum for traders and investors and answer the following question:
Do you trust ECN-brokers?
