Trading ECN forex can be a truly great way to experience the real forex markets. If you have been trading with a market maker broker previously or if you are entirely new to forex, ECN forex trading will definitely provide you the flexibility, freedom, anonimity and transparency. The forex ecn trading model offers traders a transparent trading model where you don’t have to worry about re-quotes, paying the spread but infact you can trade, fully certain that there is only a certain “commission” that you pay when you are trading ecn forex.
For complete beginners, this article provides insight into the differences between market maker brokers and ecn brokers.
Selecting the ECN Broker
The first step in getting started with ECN trading is ofcourse, to find a suitable ecn forex broker. While there are many ecn brokers available today, bear in mind that not all of them act in the same way. Scratching the surface, you will be able to learn that while all ecn brokers claim to offer ecn execution, some may vary such as an STP broker or a DMA broker. Read this article on the differences between STP/ECN/DMA brokers to gain further understanding on the different kinds of ecn trading models.
Choosing your ecn trading platform wisely
The ECN model has a few variations of forex trading platforms. These include Currenex, MT4 and cTrader. Traditionally, Currenex trading platform was the most ideal trading platform for institutional traders due to the advantages it offers. However as ecn forex started gaining popularity with retail forex traders, all the three trading platforms hold their own forte.
It is critical that you pay careful attention to the type of trading platform you choose to trade with. In fact to draw a parallel, it is very much like buying a car. So when choosing a trading platform for ecn, be sure that you test the platforms before you decide to stick to one.
Selecting your account type
Most ECN Brokers offer different variations of the ecn account types. For a full list of brokers click here and read on the reviews for the account types to gain better insights.
The account type from one broker to another can vary a lot with differences such as leverage, minimum deposit amounts, margins and spreads. Choose an ECN account type that is best suited to your requirements and pay attention to all the factors mentioned above.
Commission. Commission. Commission
Different ecn brokers charge different fees when it comes to trading lots. While you shouldn’t blindly choose an ecn broker that offers the cheapest or lowest commissions finding a balance or a compromise between the other factors mentioned above should help you identify the right ecn broker. In other words, do not base your judgement solely based on the commissions charged but look into all other aspects as well.
Spreads & Pricing
The prices that are displayed by an ECN broker can vary based on the liquidity pools and the number of participants in the network. A good way to see if the pricing provided to you is the most ideal is to visit the ecn broker’s website which usually displays a pricing widget. While the spreads displayed there may or may not be entirely accurate, it should be able to give you a basic idea on the spreads and the pricing.
Scalping/Hedging – Check your strategy
While most ecn brokers allow scalping and some even allow hedging it is always best to learn the do’s and don’t before hand. Reading the ecn broker reviews will help you gain insights into the ecn broker and will provide you with the information needed in order to choose the right ecn broker.
The above pointers, while seeming very basic actually plays an important role. Given the fact that with most ecn brokers the minimum investment requirement is usually higher than market maker brokers, it pays to conduct due diligence before you decide upon the ecn broker you want to sign up and start trading with.
Interested to learn more about ECN Forex Trading? Click here to download our free PDF on ECN Forex trading.