The Foreign exchange trading market is one of the biggest trading markets in the world, where currencies are exchanged round the clock from all parts of the world. Most people often trade forex in their spare time in order to make more money. However, there are many different ways of trading in the forex market. If you want to become a profitable trader, the first and most important thing that you need to do is work with a reputable broker. A reliable, established broker will make your life very easy. He will help you get in touch with some of the biggest liquidity providers in order to maximize your trading portfolio as much as possible.
Now, there is a difference between market makers and the ECN markets. In an ECN market, the prices are passed on from numerous market participants, namely banking organizations and other market makers. Other traders connected to ECN also pass their prices through these markets. As a trader, you will be able to see their best bid and ask prices on your trading platform, thus allowing you to decide whether you would like to make the trade or not.
Brokers who work on the ECN markets are often considered to be counterparties to conventional forex transactions. One of the main reasons for that is because they operate on a settlement basis. They don’t worry about working on a pricing basis. Many market makers offer fixed spreads to their clients, but in ECN markets, the spreads generally tend to vary. The biggest factor that determines the amount of variance is the trading activity of the pair.
Even if there are very active trading pairs, there is a chance that you won’t find any ECN spread at all, especially in highly liquid currency pairs, such as major currency pairs like the EUR/USD, GBP/ USD and USD/CHF. Now, brokers who work on ECN markets only make money by charging a commission for every trade that goes through them. Authentic ECN markets play little to no role in setting up or making the prices. As a result, the risk of price manipulation becomes significantly reduced for most retail traders.
One of the biggest advantages of trading on ECN markets is that you can get better bid/ask prices, simply because the prices are derived from numerous different sources. It is also possible for you to trade on prices that have very little to no spread at certain points in time. Moreover, the prices are also considerably more volatile in the ECN market, which works very well for people who are in to scalping. When signing up with an ECN broker it is important that you make sure they don’t trade against you. Most established ECN brokers simply pass on the orders to another customer or bank on the opposite side of the transaction. These are just some of the different reasons why you should consider trading on ECN markets. It’s a great option for people who are in to rapid trading and want to make good money.
