What Is A Forex ECN?

ECN is an acronym for Electronic Communications Network. A Forex ECN broker doesn’t require a dealing desk but in its place provides a marketplace where multiple market makers, banking institutions and traders can enter in competing bids and offers and have their orders filled by multiple liquidity providers in an anonymous trading environment. The orders are excecuted the name belonging to the ECN broker, offering you with total anonymity. A trader might have their buy order filled by liquidity provider "A", and shut the identical order against liquidity provider "B", or have their trade matched internally by bid or offer of a different trader. The very best bid and offer is showed the trader together with the market depth which is the combined quantity offered at each price level. A large quantity of market participants providing pricing to the ECN broker results in tighter spreads. Forex ECN brokers commonly charge a commission for matching trades between their customers and the liquidity providers.

Utilising an ECN broker to trade forex presents a number of major advantages, one of the most obvious being tight spreads and deep liquidity. Narrow spreads means that day traders and scalpers can benefit from minor price changes on an intraday basis. Deep liquidity ensures that significant volumes can be traded without having any effect on price this is very important in volatile market conditions and presents considerable rewards for traders utilising automatic forex trading systems. These two components combined mean that you will be able to take advantage of more trading opportunities, more opportunity equals more profit potential.

There are numerous of ECN firms available in the market today with by far the most common ECN used being Currenex. Currenex is typically used by institutions and investment banks and out of reach for many retail traders, though in recent times as the demand for tight spreads and transparency has improved extensively several commonly accepted retail forex platforms like Metatrader have been adapted to suit ECN firms. Now a lot more than ever the gap between retail investors and investment banks is lessening.

Naturally utilising an ECN provider won't be of any advantage if you don’t employ a trading strategy. Formulating a forex trading plan that takes into consideration your risk profile, chosen lifestyle and investment is vital before you start trading. Once formulating your trading plan it is advisable to then try several forex trading platform demos to see which trading platform most accurately fits your trading plan. Naturally it’s important that you select a forex platform offered by an ECN broker. It can often be hard to establish if a forex company is in fact an ECN company, however as a rule of thumb ECN providers will charge a fee on your transaction rather quoting you a widened spread.