The global foreign exchange market represents more than $ 5 trillion in daily turnover.


Banks, hedge funds, and institutional investors are responsible for most of these values, but when it comes to individual transactions, retail traders constitute the majority.


Most of them invest between $ 5,000 and $ 10,000, making it difficult to register with an actual Electronic Communication Network (ECN) broker.


Today I will discuss the benefits and risks of using a true Forex ECN broker.


Therefore, without wasting time let's start,


Forex ECN brokers require traders to invest large amounts of money to trade with them. Thus, many retail traders find themselves in the hands of market makers, also known as trading desk brokers.


Forex trading brokers give cash to their clients by taking the opposite side of the transaction when a customer opens a position. This can create a conflict of interest, which results in transaction manipulation by some unscrupulous brokers.


Thus, most traders prefer to deal with brokers without trading desks, which in this case consist of ECN brokers and Straight Through Processing (STP) brokers.


The main difference between broker STP and ECN is that ECN brokers provide liquidity to their customers by giving them access to other market players, including banks, hedge funds and institutional traders, while STP provides liquidity to their customers by directly connecting customer transactions with providers. liquidity. .


The benefits of using a real Forex broker, ECN


Forex ECN brokers are very positive compared to brokers in trading offices. This positivity stems from the many benefits traders enjoy when using a Forex ECN broker. Here are some that stand out.


Anonymous trading and neutral prices


Because anonymous ECN Forex trading, this allows traders to take advantage of neutral pricing. This ensures that actual market conditions are reflected in all trading activities.


Thus, there is no bias towards trading strategies or open positions of clients.


Traders also benefit from a variety of technical efficiencies, including fast speed of execution and tight spreads, as described in detail in this article by Forex.


Access to market participants and liquidity


When trading with ECN brokers, traders have access to other market players, including big players such as institutional investors.


As such, clients have the opportunity to negotiate with a global collection of liquid assets consisting of quality, regulated and highly competitive financial institutions. This ensures that the execution of order prices is guaranteed virtually.


Traders can open the way to success


Because ECN brokers make money from the standard commissions they set and the size of transactions flowing rather than winning or losing trading clients, they allow traders to use all strategies including scalping.


And because of the high speed of execution when trading with Forex ECN brokers, traders find it easier to use Forex Expert Advisors (EAs) to implement their automated trading strategies.


Risk of trading with a true Forex ECN broker


This can vary depending on different client profiles. But they mostly affect small retailers. Here are some that must be remembered by every trader who wants to use the ECN forex broker.


Risk of variable spread


Because Forex ECN brokers use variable spreads that are determined by prevailing market conditions, sometimes these spreads can change dramatically especially when there is slippage in the Forex market, which can affect the client's trading strategy.


When the market shows high volatility, spreads can widen significantly so as to affect open positions.


The cost of trading with an ECN Forex broker can be high


As mentioned earlier, direct contact with other market players including popular financial institutions is equipped with strong requirements. One important requirement is a high initial investment to start trading with a true Forex ECN broker.

In addition, because these brokers do not use trade spreads to generate profits, they charge a commission unless a trader can trade high volumes, the entire process becomes very expensive to maintain.


Some brokers charge as much as $ 3.50 per trade, which can be significant for retail Forex traders.


In short, when using a true Forex ECN broker brings many benefits to clients, there are also some important weaknesses that must be considered by potential ECN traders.


This can be very important when making the final decision to enter Forex trading. High-value clients find ECNs very useful while small retailers tend to choose market makers because of limited financial expenditure.


So, do you feel helped? And if you have a topic in mind then please let me know.