Settling for one ECN Forex broker can be a hard task due to the mostly unregulated nature of the forex market. This is different from the stock and futures exchanges. The most spoken of ECN forex brokers have created a wide range of ECN trading account options and lowered commissions for their clients. Electronic Communications Networks (ECN) present an edge compared to Dealing Desks, who more than not, transact against some of their clients which is a bad case of conflict of interest.
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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Alternatively known by the term ‘No-Dealing Desk’ brokers, they simply act as middle men passing trades from their clients to the direct source of liquidity or in some cases matching trades with other participants using a broker’s ECN.
An ECN broker is an expert in forex financial matters and utilizes communications networks to give clients access to money markets and other players. An ECN brokers gathers buying and selling prices lists from across a wide range of participants and alerts his/her clients better options than they would get from another broker not utilizing ECNs (electronic communications networks).
This breed of brokers deals with online platforms to get a broader reach on trading options for their clients and only ask for a commission, that makes them attractive as for them to make the said commission they would have to offer real value to their clients.
Some traits that have emerged across the board of ECN brokers include:
A lot of traders would obviously opt for this type of trading structure due to the fact that being the middle man, they do not inherit risk, rather they pass it on from one end to the other. This means they get commission rather than accumulate insurance, which is clearly at a huge disadvantage to an unaware section of clients that would have been selected to be on the unfortunate and losing end for a period of time and therefore trade against.
ECN brokerages derive profits by effecting commission rates on trades done on behalf of clients. While the commission presents a cost, this kind brokerages still tend to offer better value for money overall.
Due to the concept of commission in agreement, many ECN brokers prefer clients with sizable minimum deposits, pushing away potentially lucrative clients. Clients that do make the cut have the disadvantage of not being able to predict and set stop losses and can lose their investments in the wide spreads made available with the use of the broker’s networks.
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