What are the advantages of ECN trading?

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Nowadays, Forex is perhaps the most popular financial market with its daily turnover running above 6 trillion dollars. It is no surprise that such a large market attracts quite a lot of participants. Indeed, the range of various offers is abundant. Many brokers claim to provide the best services and the best trading conditions. But how to distinguish a truly worthy offer? First of all, pay attention to the way the broker executes trades.

What is ECN?

ECN stands for Electronic Communications Network. Brokers use this network to provide its clients with direct access to other participants of the currency market. In this system, buyers and sellers can find counterparty to their positions among other traders or banks while the broker serves as an intermediary.

What are the reasons to choose an ECN account?

There are various advantages of ECN trading, and here are some of them:

- deep liquidity and transparent pricing
- no price manipulations
- tight spreads
- no re-quotes

Let’s explain each of the benefits.

Transparency and fair pricing

ECN brokers collect quotes from numerous liquidity providers connected to the network, and based on that, present the best available prices on their platforms. Thanks to that, this system ensures fair pricing and deep liquidity. Therefore, ECN conditions are usually more transparent.

Serving as an intermediary between the liquidity providers and traders, an ECN broker quite rarely interferes with the trading process and never manipulates the prices. The only way such a broker earns money is by charging commissions for the volume of trades.

ECN accounts offer tight spreads

Another important advantage of ECN accounts is tighter spreads. As mentioned earlier, ECN brokers collect quotes from different liquidity providers such as banks, hedge funds, and others. This diversity allows brokers to provide competitive bid and ask prices. On the one hand, some liquidity providers may have lower bid and higher ask prices, but there also can be those who provide higher bid and lower ask prices. It may result in tighter spreads because traders can buy an asset from one liquidity provider at a lower price and sell it to another one at a higher price.

No re-quotes and accurate execution

Sometimes, an order can fail to be executed due to a change in the price of a traded asset. Such an occurrence is called a re-quote. Surely, traders hate when it happens because most trading strategies require immediate actions. Every second can cost a lot when the market is especially volatile. The ECN system allows traders to avoid re-quotes because it does not entail price manipulation as described above. Another key factor that cannot be compromised on is the order execution. On ECN accounts, fast and reliable execution is assured at every turn.

Bottom Line

Choosing the proper trading conditions is half the battle. The crucial aspect is that your deal is executed timely and at the best available price. Otherwise, your trading results may be disappointing. To sum up, ECN accounts are the optimal solution, as they ensure transparent conditions, fair pricing, deep liquidity, tight spreads, and accurate execution. InstaForex provides three ECN accounts of different types that can suit the needs of traders with any initial capital.

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