When you begin looking for a good forex broker, you’ll come across different types of brokers like ECN, STP, and Market Makers. Of all these options, most traders prefer to go with ECN forex brokers as they allow traders direct access to liquidity providers.
Not just that, such brokers operate on an electronic communication network (ECN), which results in faster execution of orders. ECN brokers simply trade for traders at affordable prices which makes them stand out from the rest of the brokers in the market. But, what are ECN brokers anyway? Let’s find it out in detail
What is an ECN Broker?
An ECN broker is a type of broker that uses an Electronic Communications Network (ECN) to let traders buy and sell orders in the forex market. Unlike traditional brokerages, ECN is a computerized system that works automatically to match orders between buyers and sellers on the basis of their requests.
In general, true ECN forex brokers combine prices from several market participants and hence, are able to give their clients tight spreads than would be available to them otherwise.
By trading with an ECN account broker, you get to trade in a more efficient and transparent environment. They earn by charging a commission on the trades that are being executed by traders using their platforms.
A good thing about trading with brokers with ECN accounts is that both buyers and sellers remain anonymous during the transactions. Trading with such brokers is like being a participant in a live exchange where you get the best prices for your buy and sell orders.
How Does an ECN Broker Work?
The difference between the bid and ask price is where ECN brokers often make their profit. This indicates that they desire traders that are profitable and active, as these types of traders will continue to execute lots of trades in terms of volume.
They compile a list that includes the most competitive ask prices as well as the most competitive bids from liquidity sources like large banks and financial institutions.
After that, they match transactions with the smallest possible spreads at the best possible prices, regardless of the source of the trades. In general, an ECN broker functions similarly to an intermediate between a seller and a buyer. This individual does not have any incentive in manipulating prices but may be able to use their position in the market in your favor.
What Are the Benefits of Using an ECN Broker?
In comparison to other trading solutions, Electronic Communication Network (ECN) trading and the use of an ECN broker can offer a number of advantages:
Trades Are Executed at Lightning Speed
Trading with an ECN broker gives you an advantage of the best executable live-streaming streaming pricing with instant confirmations. Since all trades are confirmed as soon as they are dealt with and filled, using an ECN trading platform is a safe way to make transactions because of the reduced possibility of price-maker influence. No requotes or interference.
Spreads Remain Tight
No market maker or dealer controls the offer or bid spread in ECN trading; therefore, traders have access to truly variable spreads. Prices in the market tend to move up and down in response to changes in supply and demand as well as volatility. If the market is right, this will allow customers to trade with even tighter ask/bid spreads.
Your Trades Remain Anonymous
Trading on an electronic communication network (ECN) can be conducted in complete secrecy if so desired. You can take advantage of the neutral pricing structure, which guarantees that the data stream always accurately reflects the prevailing market conditions. This means there is no favoritism shown to one client over another with regard to market ideas, trading methods, or other tactical considerations.
Enjoy Automatic Data Feeds
Trading on an ECN lets users use automated live data feeds to access and connect with trading algorithms, expert advisers, and risk management systems. All current ask prices and bids are included in the market data. Whether you’re using it for live trading or testing out a trading model in the past, you can rest assured that the trading process will always be consistent and trustworthy.
Access to Higher Liquidity
Trading on an electronic communications network (ECN) allows you to access a pool of liquidity – comprised of reputable, internationally active banks and other financial institutions.
Amazing Benefits of Having an ECN Account
Having a trading account with an ECN gives you easy accessibility to the worldwide forex market through the use of an automated network. This particular account is hosted on an ECN broker’s website.
Using the ECN account enables you to trade without having to deal with any third parties. In contrast to a traditional trading account, users deal directly with the exchange rather than intermediaries. But, that’s not it, there are several more benefits of trading with an ECN broker, let’s find out what those are:
- Trade-related information remains confidential
- Spreads are tight and trade execution time is less compared to other types of brokers
- ECN brokers won’t trade against its clients
- They offer transparent pricing, so no price manipulation as in the case of market makers
- No requotes to impact your trading performance
As far as the disadvantages of ECN brokers are concerned, there is just one worth mentioning, i.e., the commission, which is on the higher side compared to non-ECN brokers.
How to Choose an ECN Broker That Works Best for Your Requirements?
Finding a suitable ECN broker can be a bit tricky, as many purported ECN brokers aren’t actually ECN brokers at all. So, you need to get answers to the following questions to determine whether the broker you are considering trading with is truly an ECN broker and also if they suit your trading needs. Here are the questions to ask the broker:
- How flexible are the spreads?
- How often does slippage occur?
- Are there any order limits?
Finding the best ECN broker for your trading needs requires careful consideration of a number of different brokers. Think about how much you’ll be charged in commissions, how many currency pairings you may trade, and how helpful the customer service team is.
Evaluating every facet of a broker’s operation is the greatest way to find the one who best fits your company’s strategies. Multiple considerations should be made while selecting the best ECN broker for you. Since not all brokers are created equal, it is important to do your research before settling on a particular one.
Pay attention to the kind of spreads offered by the broker, as some offer fixed spreads while others offer dynamic spreads. Fixed spreads remain the same irrespective of how the market performs, but variable spreads go up and down according to the variations in the market.
Fixed spreads may seem a better option, but in reality, they are not, as they are usually higher than variable spreads and remain the same even when the difference between the bid and ask price of the pair you have traded has reduced.
Which Are the Best ECN Forex Brokers in 2023?
Here Are Some of the Top Brokers to Choose in 2023
Minimum Deposit: $50
Spreads: 0.2 pips onwards
Commission: $2/lot RT
Fxview is one of the top ECN forex brokers that provide traders unlimited access to deep market liquidity without the problem of requotes. The broker offers one of the tightest spreads and lowest commissions in the industry. Trading with them begins at $10. Trading conditions remain good overall and orders are filled quickly. They also allow strategies like scalping and hedging. You can get a 100% bonus on depositing a minimum of $200 with the broker. They support copy trading as well.
Minimum Deposit: $200
Commission: $6/lot rt (Ctrader account) & $7/lot (MT4/5 Razor account)
Spread: 0.8 pips onwards
Pepperstone is among the most trusted ECN brokers available for trading forex and other instruments. They offer razor and standard accounts out of which the latter is an ECN account. They offer plenty of educational and analysis tools for traders to improve their trading skills. Copy trading facility is also provided via DupliTrade and Myfxbook.
Minimum Deposit: $200
Commission: $7/lot rt (Raw Spread account), $6/lot rt (Raw spread Ctrader account) & $0/lot rt (standard account)
Spread: 0.2 pips
ICMarktets offers competitive pricing along with scalable execution, thus making it an ideal option for algo traders. They also have a wide range of third-party tools and plugins. Trading conditions are also good, but the education & research part could have been better. They also allow copy trading via CTrader.
Minimum Deposit: $100
Commission: $5/lot rt (ECN account), $3/lot rt (ECN Plus Account) & $0/lot rt (ECN Zero account)
Spread: 0.4 pips onwards
AAAFx offers ECN, ECN Plus, and ECN Zero account to its clients and they obtain liquidity from top banks and tier-I liquidity providers. Traders get tight spreads, low commissions, and real-time price feed to make quick trading decisions and get their orders filled at the best prices. They have an account for all kinds of traders, be it, new traders. Scalpers and position traders. The minimum trade size allowed is 0.01 lots and the maximum is 100 lots. AAAFx accepts all types of trading styles. It offers a 100% deposit bonus that gets added when you add a minimum of $100 to your trading account. The trading costs are low and leverage is high with the broker.
Minimum Deposit: $5
Spread: 1.2 pips
XM is another top-rated ECN broker as they offer good trading conditions to their clients. The spreads are on the higher side when compared with other brokers, but the absence of commission compensates for it. The broker offers easily customizable trading platforms, fast filling of trades, and reliable customer support.
XM also offers bonuses to its traders on depositing a certain amount. On a deposit of $500, they offer 50% as a bonus and on a deposit of $4500, they offer a 20% bonus. Quick withdrawals make it a preferred choice among traders.
Minimum Deposit: $10
Commission: $4/lot RT
Spread: 0.2 pips onwards
Roboforex is an emerging ECN forex broker that offers excellent conditions for trading. Irrespective of the trading level you’re at, you will get a good trading environment as per your unique needs. With the broker’s ECN account, you get direct access to the market interbank rates. They offer a $30 bonus on the first deposit. Copy trading feature is also available via CopyFx.
Minimum Deposit: $50
Spread: 0.8 pips onwards
FXCM is a good option for those looking to start their trading journey. Their spreads and commission are reasonable on the ECN account. The order execution speed is lightning-fast, thus allowing traders to take advantage of the best market prices without any delays. The broker also offers features like segregated funds and negative balance protection. They also provide a full range of analytical materials and don’t restrict any trading styles. Traders get to make quick withdrawals on the best trading platforms.
Minimum Deposit: $50
Commission: $0/lot rt (Standard & Pro accounts) and $7/lot rt (Raw+ & Elite accounts)
Spread: 0.9 pips
FxPro Raw+ account is the ECN account where traders get access to the best market rates of the currency pairs along with immediate order execution. Spreads and the commission are on the lower side to cater to all types of traders. The ECN broker offers a variety of trading instruments and allows traders to copy the trading strategies of successful traders. Customer support is also good, as it provides quick assistance for all issues.