What are ECNs in forex online trading – Electronic Communication Network

ECN (Electronic Communication Network) is basically a term that appeared as a reference to a special computer platform that will allow traders to perform actions in the market without actually interacting with the trade floor. The help is gained by matching sell and buy orders automatically at prices that are specified. Through the use of ECN forex trading we make sure that individual traders and major brokerages have a trade platform that is common and there is no mediator involved.
Forex Market Maker Versus ECN Forex Broker
Forex stands out as a market body that is not regulated. The ask/bid currency pair spreads can vary with different brokers. The forex market makers will establish the trader’s market place. However, the currency pair spread will depend on how the broker manages a market maker. You will rarely find prices that will be equal to the current standings. For instance, in the event that one will offer 2 pips as spread on USD/CHF, we will see the market maker offering a 3 pips spread for the traders that use its services. It is impossible to get a good, fair deal in this case.
In comparison, the ECN forex broker will also create sorts market without offering the drawbacks that the market maker deals. All orders are mapped at the best possible price. The prices will be taken directly from official charts or individual traders. All ask/bid spreads will remain unaltered. An ECN forex broker will make money through charging small fees on successful transactions or taking subscription fees from all traders that are using the services offered.
ECN Forex Trading Benefits
When you use the services of a good ECN forex broker you can open trades with one liquidity provider and close it by using another one. Alternatively you can have the entire trade completed with a single trader. It is also possible to obtain a tighter spread because of the fact that the marketplace features a very large number of participants.
Because of the fact that there are multiple sources to choose from we can get a much better ask/bid price. As opposed to the regular broker’s behavior, an ECN forex broker is never going to perform an unfair bid against the traders because they will never gain any benefits from doing so. All traders are allowed to create their ask/bid prices on currencies held.
Even though there are so many benefits that we have to consider, ECN forex trading also has numerous drawbacks. The platforms are never going to offer any charts or news in order to properly analyze market trends. On the other hand, if the trader manages to perform analysis alone, this is the best possible trading solution.