If you have invested in or are thinking about investing in forex trading, chances are that you have heard about ECN forex brokers. In an apples-to-apples comparison, while your traditional forex brokers’ business depends on relations built over a period of time to quite an extent, which ultimately affects your trading spreads, and the returns you make on your investments, with an ECN forex broker that may not be the case as they rely on commissions and offer negligible or often no spreads. As a result, it becomes a volumes game for them and a numbers game for the investor.
Most retail investors have complained of at least one bad experience with their forex broker due to the opaque nature of the business. Forex brokers make their money from playing with the spreads and do not charge a commission from traders. Many traders are often unhappy with the size of the spread, or a hit on their stop loss, or disappearing trades. As an investor, these are valid concerns that should be addressed satisfactorily by a broker. But with an ECN / STP forex broker, your forex trading enters into in a different league altogether.
The big money gameThe best ECN forex brokers often require a higher minimum deposit from traders. The ECN Forex Broker obtains cash for the transaction from their liquidity provider, and delivers client’s order to them for execution, benefiting from commission fees for each transaction and not from spreads on each trade. As a trader, you are trading with a real trader on the other side as the forex trade is passed over to interbank and not the broker. The ECN Forex Broker’s request for a currency at the market price is processed as such – at the market price. However, the split second it takes to decide on buying or selling a currency at a specific price, and putting that market order in, the price often change and so does the size of the trade. Since the buy-sell spread is of practically no concern, it is an excellent opportunity to day trade, with scalping options that are much more feasible to execute.
And for that very reason, it becomes unlikely to find mini-pip traders in the vicinity of ECN / STP Forex broker, it is strictly a big league game. The number of ECN forex brokers is not very large, and they are not looking for small trades or traders. They prefer working with the experienced forex trader and are willing to wait for the right one with the ability to back his trades.
Is it time for season tickets to the game?So ECN forex trading is a big money game. But, as a retail investor, does it make sense to jump in and try it out with your hard earned money? There may be a lack of consensus on the answer to that question, but experts are unanimous in advising novices and recreational forex traders that an ECN forex broker is strictly for the experienced forex trader.
There are advantages in going through retail forex broker, like a demo account that can be used as a learning tool and a far lower monetary requirement. However, if you are certain that you can meet the requirements of trading in large numbers, support a higher balance, don’t want a spread as wide as the Amazon, then perhaps it is time to try out an ECN Forex broker and start playing in the big league.
