Why ECN Forex trading is becoming popular

In forex trading, there are two types of brokers. Market makers or fixed spread brokers and ECN brokers. In this article, we'll take a look at the various aspects that make up the ECN forex broker and the reason why they are so advantageous for traders. Forex ECN basically got started based on the developments and innovations in the computing space and also the increase market activity and the improved internet connectivity.

The ECN forex model is built upon a a direct streaming of market activity as it happens, thus bringing the best bid and ask prices for traders who are trading on the ecn forex broker network. With an ECN forex broker model, there is a connection directly between the forex broker and the traders. This is also made up of other market participants such as institutional banks, financial brokerages, investment fund companis and so on. The biggest advantage with ECN comes from the fact that there is no need for a middleman and also the pricing offered is transparent. Unlike a market maker model where usually the market is made up by the broker who takes counter position against their client's trades.

When trading with an ecn forex broker the advantage is that due to the direct connection and because there is no middleman, the traders get to see a transparent real time market quotes along with the fact that the trades are executed instantly. Factors that have often plagued traders such as re-quotes, etc do not come into the picture here due to the ecn forex model. With an ECN forex broker, the moment you place an order, it is viewed by the seller and vice versa. The benefits being that the ecn model matches the trade orders such as buy and sell with the best possible price.

ECN forex trading is versatile in the fact that not only does it offer complete anonimity of your trades, but also direct execution. Due to the fact that the markets are always in a flux, there is an abundance of trades that are always available no matter what time of the day you trade. Unlike a fixed spread broker, ecn brokers do not hedge against your trades, meaning that there is no conflict of interest. Rather, the ecn brokers make money by charging a fee, usually known as commissions per million.

Trading with an ecn forex broker usually requires a specialized platform, therefore if traders are already accustomed to the mt4 platform, then there is a bit of a learning curve involved as there are different trading platforms that are available, such as Currenex to name one. However, due to the demand for MT4 platforms, more and more ecn forex brokers have started offering MT4 trading platforms, which is done via a MT4 bridge that connects the traders to the liquidity pool. ECN forex trading has been around for ages and was usually available for big financial trading companies.

However since the last few years we have seen a tremendous growth of ecn forex brokers that offer trading for retail and independent traders as well. If you are looking for transparency in forex then ecn forex brokers is something to be considered.