If you are a Forex trader, then you know that having a reliable ECN broker is essential to your success. But what is an ECN broker, and why is it so important?
In this blog post, we will explain everything you need to know about ECN brokers and why they are such an important part of the Forex trading process. We’ll also discuss some benefits of using an ECN broker, and show you how to find the best one for your needs. So if you’re ready to learn more about ECN brokers, keep reading!
When it comes to understanding how a broker executes trades on behalf of a trader. Then you need to dive deeper and understand how ECN works and why it is important for your trading profits.
What does ECN mean?
ECN is an acronym for Electronic Communications Network. If you ever ask yourself do big banks and investment companies trade like normal people, the answer might be no, because they are connected to the ECN and execute their trades in high speed. You can imagine the ECN like a Stock Exchange, but for forex instead of stocks. An ECN broker is a Forex broker that uses this type of network to connect its clients with the best possible prices for currency pairs. By using an ECN network, brokers are able to offer their clients tight spreads and low commissions. This type of connection is important because it allows traders to get the best possible executions for their trades.
How does a Broker use ECN to execute trades?
A broker which has a direct ECN connection uses the network to match Forex orders from different clients together. For example, if a client wants to buy EUR/USD, and another client wants to sell EUR/USD, the ECN will match these two orders together and execute the trade. This process is important because it helps to ensure that all trades are executed at the best possible prices.
What are the advantages of an ECN broker?
An ECN broker is important because it offers forex traders a number of advantages. First, as we have already mentioned, ECN brokers can offer tight spreads to their clients. This can save traders a lot of money over time. Secondly, ECN brokers offer forex traders access to the best prices for currency pairs. This is because the ECN network matches orders from different clients, which helps ensure that all trades are executed at the best possible prices.
If you choose not to have an ECN account with the broker of your choice, your broker acts as a market maker, which means that it sources prices from external providers, and the spreads for trading pairs are often larger compared to directly connected ECN brokers.
How can you get an ECN account?
Depending on the broker, you have the option to choose your account type. If you are new to trading and just want to learn, a market maker account might be sufficient. The reason is that market maker account types require smaller account balances. But not every cheap account is a market maker account, our broker of choice is Varianse. The smallest account you can choose here is a classic account that offers you small spreads and razor sharp executions.
If you want to learn more about Varianse, we recommend downloading our free ebook where we describe the whole process of joining Varianse.
