All you need to know about ECN Accounts

What is an ECN Account?

ECN account is an Electronic Communication Network that connects the trader directly with the brokerage, banks and other liquidity providers to execute a sell or buy trade. ECN accounts have been designed with an aim of matching buy and sell orders. 

Mechanism of an ECN Account?

Unlike dealers desk brokers the ECN brokers provide a direct link between the buyer and the seller. These computer based systems display the best bid and ask quotes from participants from different markets. Then it automatically matches and executes the order.  

Advantages of using ECN

1. Best Ask and Bid price: While selling or buying any asset there is a spread which is the difference between the ask and bid price. ECN matches the orders of the traders with the best possible price due to which spreads tend to be tight. 

2. Flexibility of time: ECN allows traders to trade and facilitate trading even after the trading hour. 

3. Execution speed: The execution of the placed order is immediate with tight spreads. 

4. Transparency: The order goes directly to other market participants and the trades are transparent.

Disadvantages of using ECN

The only disadvantage is the fees for using it. You have to pay a commission per trade irrespective of the outcome of the trade.

However, there are few ecn brokers that offer low spreads and do not charge much commissions-

1. Coinexx ( $2 round turn) per lot

2. N1CM ($5 round turn) 

3. FX Choice ($7 round turn)

4. JustForex ($7 round turn)

Conclusion:

ECN accounts work best for strategies that require tight spreads and fast order execution. It’s best to try a demo account of a broker and check its backend before committing to a bigger account.

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