What are ECN Forex Brokers?
If you have been trading on Forex for some time, you have probably stumbled upon a term called ECN Forex brokers. If you have no idea what it means, don’t worry because you are not the only one. ECN Forex broker is a fairly new concept and it is seen as future of trading by many experts. ECN stands for Electronic Communications Networks and it is one of the recent developments in the market.
Forex brokers use ECN to connect their clients with other participants who trade in the market, such as large banks and well-known financial institutions that run the trading business on a major scale. Brokerage firms who use ECN technology want to provide their clients with the best possible options and they pick and choose which results to offer in the buy and sell listings.
Trading with ECN Forex brokers can be very beneficial to you because they are straight-forward and they provide you with plenty of data you need. You will have all the figures and statistics related to your trading. Also, they do not obtain their funds from spreads but they take a small percentage from each trade that was completed through them.
How does ECN trading works?
ECN FX Brokers create a sort of a meeting place for both individual traders that have large funds at their disposal and big investment companies or banks and they link them all up. They bid against each other and buy or sell commodities. By doing so, they create a good environment for other traders and they can use the small spreads for their trading which are made by those major players.
As we have previously mentioned, ECN Forex brokers are not trading against you and they do not chip away your funds with every trade you make. As a matter of fact, they do not care if you are on a winning or a losing streak. So when you compare all the available information, trading with ECN Forex brokers might be better for you as an individual trader.
Is there any risk involved?
Besides the usual risk that comes with trading Forex which I am sure you are already aware of, there is also a threat of false ECN Forex brokers. So how can you make a distinction between true ECN FX Brokers and the false ones? There are a couple of red flags you should look for if you decide to trade with an ECN broker:
- Best ECN Forex Brokers are completely open with everything that happens during each trade. If a broker is holding out any information, it might be a signal that something is not right.
- If the spreads are fixed, you have probably stumbled upon a fake ECN broker.
- Day traders and traders who use scalping strategies should be allowed to trade with ECN brokers. If they are not allowed to trade, that is not a real ECN broker.
- If an ECN brokerage firm promotes huge discounts and unbelievable bonuses you will receive once you register with them, you should be concerned. As we have stated before, ECN brokers are not concerned with that.
All in all, ECN Forex brokers are seen as a promising new turn in a trading business and getting to know how it works can be really beneficial to you. If you know how to use modern trading technologies and you have enough money for conducting big trades, you should definitely give it a try.