Foreign Exchange or Forex is the trading centre for all major currencies. Currencies are traded by traders and speculators daily, with the belief that the price of a currency pair will go up or fall down. Initially, brokers and speculators traded the Forex market using Over-the-Counter (OTC) networks, which relied on intermediaries and brokers. This meant a large portion of the earning from trading fell in the hands of brokers and agents who charged commission and fees for their services.
Nowadays, the use of an Electronic Communication Network (ECN) for Forex trading has gained popularity.
What Benefit does ECN provide in Forex?
With the use of ECN, now, individual traders and small marketers can directly communicate with brokers who would assist them in trading and liquidating their funds. It means an end to many intermediate brokers and agents and their respective fees and commissions. The evolution of ECN in Forex has resulted in developing more reliability among traders, increased mobility of funds, increased profit margin and limited losses due to speculation. Following significant benefits are associated with the use of ECN
- Intermediate Trade Execution
- Automated Forex Trading and Automated market data feeds
- Variable spreads
- Anonymity
- Immediate execution of the trade
How does an ECN work?
To completely understand the role of ECN and the benefit it provides to Forex and traders, you must know how and ECN system works. The ECN is a two-way bridge for an exchange broker. From one side the Broker takes liquidity or trading currencies form actual providers and make them available to small traders. While on the other hand, the ECN Forex brokers send the orders or request from its clients to those who are actual liquidity providers. The ECN uses a highly sophisticated Financial Information exchange protocol called FIX to make all these communications happen.
How does AN ECN broker make money?
Unlike desk dealing or dealing through brokers or agencies, ECN Forex brokers are found to be way better in all regards. An ECN broker is a direct link between all major financial institutions and currency providers and traders.
All communications through ECN are direct and as good as “Live” feed, which enables the advantages of live trading to the traders. The primary benefit that helps ECN Forex brokers make good money is that the prices are streamed instantly and traders can make a quick move or call for action. The reliability of workings and information with an ECN broker is one big reason that has caused people to shift focus from desk traders.
But unlike any other Forex broker, even ECN Brokers make their money from fees and commission from their client trading. Only that this time, their quantum of profit becomes bigger as clients get to trade on current streaming price provided by institutions.
The best part of ECN in Forex is that the broker does not know how his clients play, which means the moves and tactics of trading that you make while trading is unique to you and undisclosed to the broker. The broker can take advantage of your moves. Now, this is a big sigh of relief for traders, which give them more confidence in trading with an ECN broker than a regular desk broker.
The ECN broker also makes money through networking. It’s like a chain system. Even member that adds to the down line of an ECN broker means increased bonus of the broker. These brokers also get joining bonus whenever a new trade member is added to it. Also, the brokers earn a referral bonus when a present trader introduces the system to a new trader, under that ECN Forex broker. The rewards of an ECN trader are huge with more scope of earning and better rewards.
How safe is trading through an ECN Forex broker?
One crucial thing about and ECN is that it's well regulated and licensed. Reliability and trust are one this that any trader will demand for his funds. With ECN, trading in Forex is not any gamble; it's more of a well-planned investment that will reap good rewards. The transparency of information flow and the anonymity of user data makes it a secure place for small traders, hence trading through ECN Forex brokers is much safer, more comfortable and more reliable.
You guys (editors) are drifting further and further away from subjects that are remotely “spiritual”, the group of subjects that has kept me tuned to CLN for 8 years. If I want to know how brokers make money I can find out elsewhere in the most minute detail how they do so, then turn back to CLN for stuff that really matters. This article and others miles away from your earlier themes feels more like a very out of place ad to be disposed of forthwith. Thank you for your attention.