Showing posts with label currency trading. Show all posts
Showing posts with label currency trading. Show all posts

Friday, October 5, 2012

Benefits of NDD Forex Broker Trading


In the evolution of forex brokers, ECN or NDD type of execution has been the preferred way for traders. It is therefore true that ECN or no conflict trading has been the way forward when it comes to trading forex online.

At the heart of the issue, lies the fact that an ECN broker represents a network of liquidity providers such as banks and hedge fund institutions alongside individual and institutional traders as well. With an ECN broker, the middle man is cut off as trading takes place within the ECN network. An ECN network should not be confused with a multilateral trading facility.

ECN forex brokers have made it possible for traders to trade in the live and dynamic trading environment which offers transparency of pricing and an improved execution of trades. Something which lacks when it comes to the traditional forex brokers operating in a fixed spread or a made up market environment.

An ECN operates on the basis of matching or pair the orders placed by the client. In other words, all the orders are collected into a central place and based on the orders  such as market or instant execution, the correct buy and sell participants are matched.

Trading with an ECN broker gives the benefit of trading in a transparent and a no conflict trading environment. No Dealing Desk brokers particularly make their money by charging a commissions on the trades, which is how they operate, thus eliminating the need for taking up counter positions or even having the need for a central trading desk.

Pricing and spreads with a NDD forex broker greatly varies in comparison to a fixed spread broker. Furthermore, the two aspects, namely pricing and spreads can be influenced by the participants themselves, for example if someone were to place a large buy order and vice versa.

When trading in an NDD environment, the advantage you get as a trader is the fact that your trades are anonymous. Meaning that no one really knows your information or your trade strategies. This is in stark contrast to when trading with a fixed spread broker, who in all probability knows who you are, has access to your past trade history, your total profit and loss and other such information which can be used to trade better against you.

As ECN trading starts to get more and more popular, many liquidity providers are coming on board to provide better spreads and pricing. Liquidity providers are made up of banks and also companies such as Integral or Currenex that bring with them their own liquidity providers on their ECN networks. Professional traders usually find it better to trade in a no dealing desk environment compared to trading with a fixed spread broker. Of the many advantages, ECN trading allows you the freedom to scalp or hedge your positions, especially of value is news based trading where price movements can be very volatile and to the right trader gives a great opportunity to make profits within a short span of time.

To summarize the above, it can be safe to say that the benefits of trading with a no dealing desk forex broker brings with it a great level of freedom, transparency and anonimity, which clearly lacks when it comes to trading with a market maker forex broker. For the more professional broker as well as for those who wish to take their trading skills to the next level, ECN trading is the right way to get started.