ECN brokers and ECN

The first e-commerce network ECN (Electronic Communication Network) appeared in California in 1999 and was called Currenex. This brand is well known to many traders: the system is still the leading one in the ECN niche. For more than a decade of its existence, the technology has attracted millions of users and has become the next step in the evolution of the currency trading market.

What is an ECN-broker?

The main distinguishing feature ECN broker from the classical dealing center is that the transactions are directly entered into the interbank market. In this case you can completely eliminate the intermediation and the possibility of playing the broker against the trader. With ECN the user gets access to the real market where liquidity is supplied by the broker's counterparties - large banks, hedge funds, financial institutions - or its partners.

It is also worth noting that trading at ECN broker is conducted according to market laws. You place your bid, which goes into the so-called "bid stack" and becomes visible to other participants. If your request matches the other requests in the cup by the specified criteria (price or volume), it is closed automatically. In fact, we have an open system of mutual clearing with absolute transparency. In any case, before you try to trade on ECN and evaluate the advantages of this system, it is necessary to have enough experience in the market.

Pros and cons of ECN-broker

The main advantage of the system in comparison with the usual market maker is the size of the spreads, which are much narrower than the standard spreads on the market maker. This is due to the fact that ECN brokers earn at the expense of the commission on the volume of transactions, which in turn indicates the direct benefit of the broker from the success of the trader.

Another advantage of working with ECN broker is the instant execution and absence of requotes, which is most convenient for scalping and intraday strategies. At the same time, there are nuances.

First, because trading is done according to market conditions, no one is able to guarantee the execution of your stop order, because the opposite order may simply not exist.

The second pitfall is the poor functionality of the ECN software in comparison with the Metatrader platform, which is so popular among many traders. On ECN the emphasis is placed more on fast trade than on technical analysis. A compromise in this matter is found in the form of crossing MT4 with Currenex, as it is done, for example, in FXOpenThe company was one of the first to offer its clients ECN trading with MetaTrader 4.

Among the pluses of ECN it is worth noting the relative accessibility of work on these accounts. If earlier only banks and large financial funds could take part in trades, now with a deposit of 1000$ one can easily enter the market. There is also an opinion that those who prefer fixed spreads would not be interested in working with ECN-broker, because floating spread tends to increase significantly before news releases. However, this position is subjective enough.

Who is ECN for?

Summarizing the above, we can confidently advise to try their forces on the ECN to those traders who have successfully approved themselves in scalping strategies or know a lot about the use of robots, as well as are able to respond quickly and adequately to any changes in the live market. At the moment ECN (Electronic Communication Network) is the most progressive system that supports fair and transparent trading with the ability to choose your own liquidity provider.

In conclusion, it is worth noting that very few companies offer easy access to ECN in the familiar MetaTrader 4 for Russian users. Among them we can single out FXOpen, a broker that occupies one of the leading positions by the level of service and trading conditions according to traders' reviews. Another nice feature of this broker's ECN accounts is the spreads, which do not exceed 1 pip during standard market activity (for example EURUSD from 0.2 pip, GBPUSD from 0.3 pip, USDCAD from 0.1 pip etc.).

You can evaluate the opportunities of trading on ECN right now by opening FXOpen demo account.