February 8, 2011
Understanding Forex Trading With An ECN Broker
By Planet Wealth
pECN is an acronym for Electronic Communications Network. A Forex ECN broker doesnrsquo;t have a dealing desk but instead provides a marketplace where multiple market makers, financial institutions and traders are able to enter in competing bids and offers and have their orders filled by many liquidity providers in an anonymous trading environment. The trades are done in the name belonging to the ECN broker, offering you with absolute anonymity. A trader might have their buy order filled by liquidity provider A, and close exactly the same order against liquidity provider B, or have their order matched internally with the bid or offer of a different trader. The best bid and offer is showed the trader along with the market depth which is the combined quantity offered at each price level. A sizable quantity of market participants providing pricing to the ECN broker leads to tighter spreads. ECN brokers usually charge a commission for matching trades between their clients and the liquidity providers./p
pUsing an ECN broker to trade a title=forex href=http://www.icmarkets.com.au target=_blankforex/a provides a number of major advantages, one of the most obvious being tight spreads and deep liquidity. Narrow spreads ensure that day traders and scalpers can exploit small price movements on an intraday basis. Deep liquidity means that substantial volumes can be traded without having any effect on price this is very vital in unstable market conditions and provides considerable rewards for traders using automatic fx trading systems. These two components combined mean that it is possible to benefit from more buying and selling opportunities, more opportunity equals more profit potential./p
pThere are a variety a title=forex ECN href=http://www.icmarkets.com.au/forex_ic_markets_encyclopedia.html target=_blankforex ECN/a brokers available in the market nowadays with by far the most widespread ECN used being Currenex. Currenex is typically used by institutions and investment banks and out of reach for most retail investors, but in recent times as the interest in tight spreads and transparency has improved significantly various commonly accepted retail platforms including Metatrader have been tailored to suit ECN brokers. Now more than ever the bridge between retail investors and investment banks is lessening.nbsp;/p
pOf course utilising an ECN provider is not going to be of any benefit if you donrsquo;t have a strategy. Building a a title=forex trading href=http://www.icmarkets.com.au/forex_ic_markets.html target=_blankforex trading/a plot that takes into consideration your risk profile, life-style and investment is vital before you start trading. After formulating your trading strategy you ought to then try one or two forex platform demos to see which trading platform most closely fits your trading approach. Obviously itrsquo;s imperative that you select a forex platform offered by an ECN broker. It can often be tough to verify whether or not a forex broker is in fact an ECN broker, but as a rule of thumb ECN brokers will charge a fee on your transaction rather quoting you a widened spread.nbsp;/p
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