Over the past few decades, the forex industry has progressed and undergone some drastic changes. These changes have served to make the forex trading scene more profitable and user-friendly, while also ensuring that more people and institutions have access to the market. The advent of technology has further improved the forex trading market, as many trading tools and resources have been created to simplify the way we trade and to ensure that profitable opportunities can be taken advantage of in real-time.
Electronic Communication Network (ECN)
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One of the developments seen in the forex sector is the electronic communication network (ECN). An ECN is a computerized system that matches buy and sell orders for assets in the market. The system executes the orders automatically, which makes it better than the previous manual method deployed. An ECN connects major brokerage platforms to their individual traders, enabling them to trade directly between themselves without the need to use a middleman. This system has also empowered investors in various parts of the world to trade with each other quickly and easily.
What is ECN Broker?
An ECN broker is a forex financial expert that deploys electronic communications networks to grant its clients direct access to other players in the markets. Since an ECN broker integrates price quotations from numerous market participants, it usually offers its customers tighter bid/ask spreads than they could get anywhere else. As such, ECN brokers usually charge a fixed commission for each transaction.
ECN brokers are non-dealing desk brokers, which means that they do not pass their orders to market makers. Rather, they match the participants in a trade electronically and hand over the orders to the liquidity providers. The ECN brokers cannot trade against their clients since they match trades between market participants.
Let us take a look at some of the top ECN brokers in the industry and what they have to offer.
This is one of the oldest ECN brokers in the industry. TeleTrade has been around since 1994 and continues to provide excellent services to clients all over the world. TeleTrade is a regulated broker by the CySEC and they enable their clients to trade a wide range of assets, including forex, cryptocurrencies, equities, commodities, and more. With offices in Cyprus and seven other European countries, TeleTrade has gained a global presence over the past two and a half decades.
With TeleTrade, traders can decide to use the popular MetaTrader 4 (MT4) and MetaTrader 5 (MT5) platforms, with each of them coming with numerous trading tools and resources. For the MT4 platform, the multi-terminal service is available for multiple account managers. The mobile trading on TeleTrade is also flexible and convenient for users.
As one of the oldest ECN brokers, TeleTrade grants users access to over 200 financial instruments in numerous markets around the world. TeleTrade also supports multiple account types to cater to the individual needs of its users. To reserve its place as one of the best ECN brokers, TeleTrade offers dedicated ECN and NDD account types to its customers. The available trading tools and indicators are effective for carrying out fundamental analysis. Fundamental analysis is also made easy with the daily news section and the education center housing various trading guides and other trading resources. Since its creation, TeleTrade has always looked out for its clients, rolling out services and features that ensure maximum trading effectiveness on a wide range of assets. The tight spreads available on this platform also ensure maximum profitability. The TeleTrade payment system is designed to ease both the deposit and withdrawal of funds and this broker also has tight security measures in place to protect the funds of its clients as well as their private information.
Founded in 2003, GSI Markets has been one of the best places to trade forex and CFD products. It is one of the leading ECN brokers offering a wide range of financial instruments to clients all over the world. On GSI Markets, users have access to two intuitive trading platforms, including the MetaTrader 4. Each of the trading platforms is equipped with high-end trading tools and resources to ease the trading process for its users. A unique feature about GSI Markets is that they allow social trading, which means that the newbie traders can learn from and copy the trades of experienced and established traders. In this way, these traders will be able to learn the skills of trading without putting any money at risk.
At GSI Markets, you have a wide choice of safe and secure banking options, allowing you to select your preferred payment method for depositing and withdrawing funds. Thanks to the low spreads available on GSI Markets, traders stand to earn more profits when their trades end successfully. To cater to the various types of traders available, GSI Markets offers diverse account types, with each of them having unique and tailored features. The Islamic account type is specially designed for Muslim traders, allowing them to trade within the jurisdiction of Sharia Law. GSI Markets also has dedicated ECN accounts, with the Platinum ECN account catering for pro traders and investors. This ECN broker also has one of the best customer service teams in the industry and they attend to every customer quickly and professionally. They are online 24/7, catering to the needs of their clients, especially those in the cryptocurrency sector. The security protocols on GSI Markets helps to protect customer funds and their private data at all times so that investors can trade with complete peace of mind.
Arum Capital is one of the newest ECN brokers operating in Europe. Although it is based in Europe, the broker offers its services to traders all over the world. At Arum Capital, users have access to over 100 financial instruments, including commodities, forex currencies, indices, and cryptocurrencies. As an ECN broker, Arum Capital provides people with direct access to these financial markets, without going through any middleman. All transactions are executed via FIX-protocol. The broker also supports both the MetaTrader 4 and MetaTrader 5 trading platforms, with each of them packed with powerful trading tools and indicators. Arum Capital recognizes the importance of carrying out in-depth fundamental and technical analysis, hence the reason why they provide all the necessary resources for traders to excel. For fundamental analysis, Arum Capital keeps its clients posted with the latest news from the financial markets. It also has an expansive educational center that helps traders to improve their knowledge of the financial sector. For technical analysis, Arum Capital provides its clients with access to a wide range of trading indicators and charts for all the financial instruments available.
Depending on the nature of the trader, Arum Capital offers various account types, with each of them having a wide range of features and services. The safety of customer information and funds are also important. As such, Arum Capital has implemented a secure payment system, including the Investor Compensation Fund (ICF), so as to ensure that people do not lose their money in case the broker finds itself in a difficult position. Furthermore, the site has SSL security protocols in place to keep customer data confidential at all times. Arum Capital is properly regulated by the Cyprus Securities and Exchange Commission (CySEC), making them one of the most trusted and reliable ECN brokers in the industry.
2Mercados is synonymous with online trading as it has been operating in this space for the past two decades. It is one of the leading ECN brokers in the trading industry, providing people with access to various financial markets. One of the most captivating features about 2Mercados is the presence of the traders’ academy. Here, both new and experienced traders and investors can learn more about the financial markets and how they can use their knowledge to become successful forex and CFD traders. After participating in the industry for the last 20 years, 2Mercados has a wide selection of financial assets, including forex, stocks, indices, CFDs, and cryptocurrencies. The funds of their traders, as well as their financial and personal information, are kept safe and secure on the 2Mercados platform at all times. With various payment options, users on this ECN broker can deposit and withdraw their funds with ease.
There are various levels of forex traders, and 2Mercados has created account types to cater to the needs of each group. The VIP accounts enjoy leverage as high as 1:400, which allows them to earn massive profits from their successful trades. On 2Mercados, the major trading platform is popular MetaTrader 4. The platform is used by a lot of traders due to the benefits it offers and the features available. Their trading platform houses more than 30 charting tools and 51 technical indicators, making it the perfect place for traders to access the financial markets. 2Mercados also supports backtesting, allowing users to test their trading strategies before deploying them on live trading. The intuitive and user-friendly nature of 2Mercados is another reason why thousands of traders around the world have partnered with this broker. With the economic calendar and daily news available on the site, market analysis can be done with ease right on the site.
Benefits of Trading with an ECN Account
When using an ECN account, you will get to enjoy full transparency on your trading activities. This is because the broker connects your orders directly to other market participants, with no middleman involved in the trading process.
ECN accounts use No Dealing Desk technology, which means that there are no re-quotes. Thanks to the use of this technology, traders get to trade the assets in real-time as their orders are sent directly to the markets. As such, traders do not miss out on valuable trading opportunities because of re-quotes that are inherent with other account types.
ECN accounts get to enjoy low spreads, which means that there is little difference between the bid and the asking prices. When trading assets, it is best to trade when the spreads are low, thus, the reason why ECN accounts are preferable for most traders. In times of market volatility, ECN accounts sometimes maintain zero spreads.
Best Bid and Ask Prices
When using the ECN accounts, you get to enjoy the best bid and ask prices. This is because your order is connected to a variety of market participants, which means that it is easy to determine the best bid and ask prices and act on them. You do not have limited options when using ECN accounts.
With ECN accounts, trading is facilitated both during the market and outside the market hours. If your trade is active beyond market hours, this may allow one to stand the chance of making more profits.
Cheap Trading Fees
The cost of trading with ECN accounts tend to get cheaper above a certain trading volume. This means that active traders that trade a large volume of assets get to enjoy the benefits of ECN accounts due to the lower fees charged.
What is a Dealing Desk?
In the forex market, a dealing desk is a place that is allocated to forex dealers at the bank or a financial institution. The forex market is open all the time, which means that several institutions have dealing desks all over the world. Although they are popular in the forex market, dealing desks also execute other financial instruments like stocks, ETFs, commodities, and options.
The dealers are available to facilitate the trades on behalf of their customers, either acting as the principal or the agent. When the dealers act as the principal, they take the other side of the client’s trade. In this scenario, the dealer could be taking a risk in the transactions. However, when acting as the agent, the dealer handles the orders of the client by finding liquidity in the secondary market. In this scenario, the client receives the same price executed by the dealer on ab order. When using the desk dealers, the clients do not see the real interbank market rates.
The advent of electronic trading has seen the number of forex desk dealers decline drastically. The No Dealing Desk (NDD) brokers operate differently from the dealing desk brokers as they do not pass the client’s orders through a dealing desk. This means that the brokers do not take the other side of their client’s trades since they serve as the link between the client and the market.
When dealing with NDD brokers, there is transparency, unlike with a dealing desk. With a no-dealing desk, clients get to see the real bid and as prices of the assets. In NDD, the broker makes money by either charging a commission for trading or by simply putting a markup by increasing the spread of the trade. In many ways, the no-dealing desk has improved the forex trading market.
What is STP?
STP (Straight Through Processing) is a type of no-dealing desk forex brokerage model. In the STP model, the broker sends the client’s orders directly to the market without passing through a dealing desk. The STP broker operates similarly to the ECN broker as it passes all the client’s positions directly to the market via liquidity providers or interbank exchange houses. With STP brokers, the traders get to enjoy a highly transparent trading environment where there is no conflict of interest with the clients.
While the ECN accounts are purely a no-dealing desk model, STP accounts are a combination of the ECN and dealing desk models. With STP trading, there are no conflicts with the client’s orders as they are sent directly to the liquidity provider. The market goes on to absorb the order without a broker taking part in the deal. Similar to the ECN brokers, STP brokers also make money from the spreads they charge per trade. The number of re-quotes is lower with STP brokers compared to the dealing desk brokers since the traders are connected to a larger liquidity pool, and the orders are completed faster than the market maker accounts. With STP accounts, traders enjoy faster orders, seamless trade execution, and other beneficial trading conditions.