19 Jan

ECN Brokers: What Are They and Are They Beneficial?

January 19, 2021

Introduction

ECN brokers are quite popular these days all over the world because of their non-dealing desk services. It does not give away order flows to the market. Rather, they use their electronic communication network to match the trades with the traders and pass on orders to the providers. They usually facilitate all types of trades for their interested investors across the world. They play a vital role in the foreign exchange market as well. ECN Forex brokers also do forex exchange trading for their clients in the market.

What is an ECN Forex Broker?

ECN broker is a kind of foreign exchange market brokerage which uses the Electronic Communication Network (ECN) to find the right match of buy and sell orders in the forex exchange trading market. ECN is basically a computer-based trading service which matches different orders of the buyers and seller automatically in the foreign exchange market. If you want to match your buy and sell orders, then there is no better option for you without ECN brokers. Only the best ECN brokers will be able to provide you live quotes of buy and sell prices from the foreign exchange market. It will also show the highest bid and lowest offer prices for any forex trading pair available in the market.

What is the different thing about an ECN Forex Broker?

As the ECN brokers offer a direct connection between the two parties of a trade, it is considered as the superior dealing broker right now. Usually most dealing desk brokers finalize a trade in two ways, one they execute it by taking the opposite side of the trader where they play both the buyer and seller role in a trade and two is they execute it by passing on orders to the market makers. But still they have some drawbacks as well which let people down sometimes. While taking the opposite side of the trade by themselves, they have to make a counter investment offer against their clients and it is a conflict of interest which can’t be done by a true ECN broker. In case of passing on the order to the market makers, the trading process will slow down the execution and because of this reason the result for the clients will be getting a less favorable price in the foreign exchange market.

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Why are they beneficial?

ECN brokers offer two major advantages to their clients which give them a lot of benefits in the market. The main benefits they get from these two advantages is getting a lower trading cost as an investor which pave the way for getting higher amount of total profits or lower amount of net losses. Those two advantages are as follows:

Lower ask and bid spreads

While dealing with forex currency pairs and financial assets, you will always find a difference between the spreads of the best available buy and sell prices in the market. Best available sell price is known as “ask” and the best available buy price is known as “bid.” Buyer needs to pay the ask price while seller needs to take the bid price in a forex exchange. Forex market has always seen tighter ask-bid price spreads because of ECN brokers match the orders of the traders with the best available prices among all the traders and sellers of the forex market. Therefore, traders doesn’t have to enter or exit into the market positions according to the dealing desk broker. They can do it when the prices are more favorable to them which is a great advantage for any type of traders.

Low commission rate

Low commission rate is an incredible aspect and feature of ECN brokers. They never make money from ask or bid spreads. Rather they prefer to charge their clients with an affordable and flat commission fee. Therefore, traders don’t have to pay them a huge sum of money to get services from the ECN brokers. There will be no hidden charges as well which can reduce the profits of the traders. So, traders will make a huge amount of profits and get to keep all by themselves. While reviewing the ECN brokers, you will learn the commission rate so you will prepare the fees alongside your investment capital. You won’t have to worry about it after having profits from the market.

Conclusion

ECN brokers directly connect all the buy and sell orders of the traders using the electronic communication network (ECN). They always offer their clients a faster and secure execution of orders and can get you the most favorable prices of the market. ECN brokers are better than their alternate desk dealing broker because they don’t need to use requites to present trades to their clients. Therefore, true ECN broker are surely one of the best choices for you in trading.

By Top ECN


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