- Analyst AZA
The positive and negative sides of ECN accounts
On any kind of market, some sellers want to sell the product at some cost, and some traders want to buy it at their price. A similar situation is observed in the currency market, where currencies are sold and bought. That is, the seller sets its value - the price at which he intends to sell the currency, and the buyer at the same time places an order with his prices (for purchase). If we talk about forex, then the principle is this: all applications that come from both sellers and buyers, are collected in a single repository - a glass of applications. If the bid and ask prices are the same, then the transaction is made. To realize the basic concept of ECN system formation, that is, to create a technology that enables us to carry out trade operations, while reducing the participation of third parties, i.e. intermediaries to a minimum. ECN accounts allow us to unite market participants among themselves, linking them directly, avoiding the services of those intermediaries. Modern forex brokers provide access to this kind of account, but not everything is as this technical solution is quite expensive. Many companies just created a common option - a combined solution. For example, MetaTrader 4 ECN, declaring this program a full-fledged trading option, misleads traders and is not true, since this terminal can not be technically connected to the ECN system. For those who prefer a scalping strategy, only the ECN broker AZAforex with the Mobius Trader 7 trading terminal is suitable. As for the pros, then the obvious advantages include the following:- instant, without delay, providing traders with all necessary information;- Ultimate transparency: all orders of market participants that are broadcast through the network, enter the market, influencing the dynamics, and thereby create competition to other brokerage companies of the market. What features does the ECN account open?1) instantaneous implementation of orders;2) is advantageous in that there are no requotes;3) minimum spreads. When a trader prefers this type of account, then they do not have Limit and Stop levels, that is, there is no limit to the minimum distance between the current price value and pending orders. This allows the player to conduct trading within the spread. Also, traders can freely use such trading tactics as scalping or piping. The withdrawal of trading operations is carried out directly to liquidity providers. The prices offered by the parties to the transaction are different: by the amount of the spread. Spread may fluctuate depending on price changes. Also among the advantages of ECN accounts are:1) the broker does not profit from the spread himself, but from the commission, he determines from the transactions;2) there are no requotes, at the price instant execution of orders (in a network) is made;3) the prices themselves are created based on the offer of sellers and buyers. That is, we can say that the use of ECN-type accounts on the forex exchange and there is a demonstration of work in the real market. It is with this fact that ECN is very attracting traders. But the process of interaction with an account of this type is complicated (if to compare with the MetaTrader), but its obvious advantages dominate. If the broker provides ECN services (trading on accounts of this type) this is already a clear indication of its reliability. The use of the ECN account excludes haste: the process of trading with them becomes more rational, and thoughtful. Undoubtedly, such a tool for trading on the forex market, like the ECN account, is an attractive tool for many market players. Using this model, traders get access to the interbank market, where counterparts for it will be not only other players but also various organizations - banks, funds and so on. All members are on equal terms and their rights are also equal, and all actions and operations are based on the principle of transparency. The main drawback of such accounts is, of course, a high initial deposit capital. Secondly, this is increased complexity of the system, which implies that the player has appropriate experience and knowledge. Summing up, we can conclude that ECN account is preferred by experts: professionals who have been working for a long time on forex trading and receiving a stable profit. But this system will also be useful for a newcomer who will be able to master it, and then use it in his trade on the foreign exchange market.
What features does the ECN account open?1) instantaneous implementation of orders;2) is advantageous in that there are no requotes;3) minimum spreads. When a trader prefers this type of account, then they do not have Limit and Stop levels, that is, there is no limit to the minimum distance between the current price value and pending orders.