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What is ECN account in Forex
Brokers of Forex offer their customers various types of accounts among which there are weird abbreviations. If You have already started to explore options, you probably have met concepts such as STP or ECN.
In this review we will discuss what an ECN account (Electronic Communication Network), its distinctive features and why this is a favorite technology of professional traders.
Let's start with the fact that some companies offer its clients accounts, built on different technologies, others are limited to one option. To evaluate the benefits of ECN accounts, you need to name the main types of deposits offered by Forex:
• standard accounts
• NDD-technology
The first option is a big part of Forex trading accounts, in which there is no registry, for example, ECN, NDD, STP. This means that a high probability situation when the broker takes the client's transactions on the market, acting as counterparty. These companies are often called "kitchen", the more You can read here.
The second option in recent years is quickly gaining popularity in the currency market, as is the transfer request from the client without any processing by the broker counterparty in the market. Imagine that a trader decided to buy 0.1 lot EUR/USD currency pair. As soon as the speculator pushes the button of the transaction, its application is transferred to the interbank system.
ECN is a virtual system that connects the automatic application of trading participants among themselves. The system may be, for example, banks, investment and insurance funds and so on. The most popular ECN system with a large number of major participants is Integral, and LEMAX.
Brokers: ECN accounts:
• Alpari
• Roboforex
the Forex ECN
Imagine the ECN system is quite simple, what you will need to understand the needs of market participants. Organizations that need constant or periodic exchange of currencies, are connected to interbank environment, where to send your application. The system automatically connects the counter orders without processing any third party, that allows you to make trades almost instantly.
However, there are specific nuances:
• if there is no counterparty at the stated price, the transaction will be closed through the neighbouring value of an asset, where there is a counter application;
• the application can be partially processed at a given price, and partly on the next, if the counterparty with the amount missing at the desired value;
• there are no conflicts of interest between the broker and his client, because the transaction is immediately transferred to the market, which are connected with the best priced counter order;
• inaccuracy in the application of the trader, relates to the lack in this moment of colliding volumes, may lead to the closure of positions not only at a price that will be less profitable for the trader but more profitable.
We give simple examples of situations that will highlight several features of the ECN accounts. A trader wants to buy 1 lot of a currency pair at the price of 1.3450, but the system closes him of 0.6 lots at 1.3450, and 0.4 lots 1,3451. May be another option, when instead of buying 1 lot at 1.3450, one gets a lot for 1.3448, which is slightly cheaper.
Modern ECN system is very liquid, this means that over the counter applications no problem, because almost all participants of trade sent to the exchange. No wonder this type of account is preferred by scalpers, the success of which directly depends on the speed of execution of operations.
Professional traders also prefer accounts use NDD technology for transactions, that would not be a conflict of interest with the broker. It is reasonable and justified, especially when it comes to trading for large sums of money. In this case, the trader will face a situation when the company worsens the terms of trade, seeing that the client earns at her expense (i.e. "kitchen").
In addition, ESN no re-quotes and no restrictions on the time of the transaction and the minimum distance from market price to the point where you want to place a pending order. The presence of these constraints indicates the "kitchen" techniques of the company.
When trading on accounts with NDD-technology transactions the trader takes the Commission (its size depends on the position volume in lots) and the spread, which represents the interest of the broker. In General, it turns out not so much as the company put a small spread for its services in Forex, and the Commission system is not large. But Your trades will be placed on the market, and this means that there is no need someone "spoke in the wheel" of Your trade to insert.
Now You know what is ECN account, and where to register them. I should add that in most cases the opening of such Deposit brokers ask for $100-500, depending on the specific company. In principle, this means available even for people who are not yet ready to risk in the foreign exchange market, large sums of money.
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| Category: Forex | Added by: (06.11.2017)
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| Views: 363
| Rating: 0.0/0 |
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