Every trader dreams of having the widest range of trading opportunities and trading tools along with perfect trading conditions and low risks. Is it really possible in today’s trading environment?
Yes, it is. The trading industry keeps evolving. % years ago it used to be next to impossible. Luckily, the time has changed. Today’s Forex brokers offer optimal trading conditions to their clients, along with innovative products and services that make their lives easier.
Most of it has become possible due to 2 new technologies – ECN and STP. These are the very technologies that allow traders to work with major liquidity providers directly.
What are these technologies and what is the difference between them? Let’s ask Dmitry Ranev, CEO of GKFX, a major Forex broking company.
ECN and STP
According to Dmitry Ranev, CEO of GKFX, today’s Forex market is hard to imagine without ECN and STP. Probably, one day someone imagined a better future and worked hard to implement the dream. As a result, all of us can enjoy nearly perfect trading conditions.
It is not accidental that the world’s best broking companies are actively promoting ECN and STP along with their own innovative solutions. For example, GKFX has recently introduced an exclusive system called GKFX ECN with access to Level II market depth. It combines all the benefits of ECNs and the company’s innovation solutions. As a result, a GKFX trader gets a competitive edge over rivals.
ECN and STP: Differences
STP (stands for Straight Through Processing) is an automatic system aimed at delivering the trader’s orders to liquidity providers. ECN (electronic communication network) is a system that allows the trader’s limit orders to join the liquidity offered by banks to form the aggregate liquidity pool for other market participants acting as counteragents.
The major difference is that ECN traders can see their own orders along with the liquidity offered by other market participants. At the same time, their limit orders influence the company’s spread. Therefore, the clients can trade with each other within the company and with major liquidity providers.
Let’s consider an example:
You send a buy order. You order is executed at the best price available at the moment. However, your counteragent may be represented by a major liquidity provider or another trader like you who trades with the same broking company. Therefore, an ECN trader gets a competitive edge at the expense of the fact that the price may be improved by liquidity providers and/or local traders.
Moreover, if 2 traders from the same broker make a trade with each other, there is no need to send their orders to the available ECN and wait till the liquidity provider responds, which saves a lot of time.
GKFX ECN is the local system that can process 30 000 orders per second. The ECN system can plug in an unlimited amount of liquidity providers combined into a single stream. This allows GKFX traders to get their traders executed at the best piece and speed. At the same time, the trade can see the entire depth of the market.
ECN and STP: Execution
When trading through an ECN, the execution of orders is done on the basis of a client’s order. The market depth is instantly checked for the best price. The liquidity consists of the so-called liquidity bands (they include the price and the volume). More often than not, the bigger the volume is, the worse the price you can get. If the price is coming from another trader within the company, it is executed instantly. If the price is offered by a liquidity provider, the system sends a request and executes the order on approval. Obviously, in this case the process may take some time. Therefore, the price may change, so the order may be executed at a better or worse price. In a good ECN or STP system this is what we actually get. However, poor ECN systems always change prices for the worse. Therefore, it is crucial to choose the right ECN broking company. For example, GKFX ECN is such changes are rare because several innovative solutions allow it to increase the processing speed. More often than not, orders are executed at better prices when there are such changes.
There are 2 major types of execution in ECN and STP - Market execution and Instant execution.
For more details, please visit the company’s official website - http://www.gkfx.com/ENG
To sum up, we want to underline the fact that true ECN and STP broking companies offer best trading opportunities. Moreover, there is no conflict of interest between the trader and the ECN broker, which means such brokers always offer win-win solutions.
