What You Should Know About Ecn Trading In Forex
Forex trading is risky but provides great potential to make big profits which is why it is so popular despite the risks involved
. In this article, we shall learn about the important things to bear in mind before you start trading forex and most importantly what you should know when trading ecn forex online.In the world of forex, the brokerages are made up of two types. Market makers that offer fixed spreads and do not charge commissions and Electronic Communication Network or ECN brokers that offer direct access to the markets and charge commissions on the lots that are traded. ECN brokers have started to gain in popularity due to many reasons ranging from restrictions often put forth by market maker brokers to the fact that the spreads are fast and often the best bid and ask prices that are displayed to the trader.
Trading witn ECN brokers offers some distinctive advantages compared to market makers however it comes with its own set of obstacles. For example, while you can start trading forex with just $1 with most market makers, ECN forex brokers require a minimum deposit of $500 or more and if you really want to access the markets, then trading on the Currenex platform will require an investment of $50,000 or more. This is because ECN forex trading is still in the initial stages. This was the preferred trading model in forex when it came to large institutional clients such as JP Morgan for example whose average trade usually runs in millions if not billions.
ECN brokers offer a certain level of transparency and anonimity to your traders. Compare this to trading with a market maker where in the broker knows your trading styles, the traders you have placed and so on. In an ECN environment, traders can simply place their trades and brokers just pass on the orders straight into the markets thus protecting your privacy while giving you access to larger market pools.
When it comes to trading, almost any forex trader would know that trading during news releases and using strategies such as scalping are prohibited. ECN brokers tend to offer a level of flexibility to traders that allows them to scalp as well as hedge their trades. Most forex traders believe that ecn forex is the real model in forex as the broker you trade with simply charges a fee for trading, the way it should be rather than trade against you and make up the markets.
If you are considering to trade forex then it becomes important to understand which type of a broker you want to trade with. While there is no such thing as a good broker or a bad broker, whether you are trading with a market maker or an ecn, each brings with them their own set of pros and cons. This is something traders need to consider when choosing a forex broker.
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