1} Do the terms ‘Instant execution’ and ‘Market execution’ mean anything in terms of whether the forex provider is a market maker or ECN/STP ? Or are they just execution types which have nothing to do with whether the dealer is a market maker (dealing desk) or ECN/STP type provider ?
I am reading in various websites and it is not very clear.
2} Also, everyone claims to be an ECN. How do we know whether it is ECN or dealing desk ? What is the give away to show its a dealing desk / market maker and what is the give away that it is an ECN type.
3} Since there is no exchange for forex, which market do the ECN providers send the orders to ?
Market execution is essentially instant execution as a market order is filled at the first available price. That probably isn’t a great indication of broker type.
2} Also, everyone claims to be an ECN. How do we know whether it is ECN or dealing desk ? What is the give away to show its a dealing desk / market maker and what is the give away that it is an ECN type.
I would say whether they charge a commission. ECN brokers don’t (shouldn’t) make a profit on the spread, so they make it from fees.
3} Since there is no exchange for forex, which market do the ECN providers send the orders to ?
The ECN(s) they are linked to [I]is (are)[/I] the market where the orders get sent.
I have a provider who gives instant execution and charges commission. But to add, it also has limit orders and stop orders for entry for both long and short orders.
Is this an ECN or Dealer desk ?
Does this mean there are multiple ECN(s) or a single ECN to which everyone connects ? If it is multiple how do we decide which ECN is better ?
In general, the fact that they have a big spread but no commissions.
If you look at EUR/USD, for example, a market-maker type of broker will have a typical spread, during regular trading hours, of around 0.8 - 1.2 pips (some are even worse) but doesn’t charge commissions. A true broker will charge you a commission for trading (they vary, but in practice it’s very likely to be something between $3.50 and $5 [I]per round-trip[/I], i.e. covering the cost of both opening and closing the trade), but their only “spread” will be the 0.1 pips between the market’s current “bid” and “ask”, because they don’t make money from that. So it’s a whole different structure and fee-model.
Other give-aways include the fact that true brokers require far higher deposits, don’t offer “bonuses”, don’t offer dangerously high leverage, and don’t offer small-size (mini-lot etc.) trading. There are a few more comments here, though whether they help is another matter … :8:
[Edited to add: I’m not cheeky enough to offer comments on your other questions above, because John (Rhodytrader) is a far better source of information than I am.]
A lot of them provide mini lots and prizes and leverage etc. I am yet to come across a major provider that does not give a mini lot and leverage and prizes etc. Many of them have 2 types of accounts - one is with mini lots, small deposit and prizes etc and the other is the one with only standard lots, big deposits etc.
I know IB provides this. Most others have both account types. Example - Dukascopy, Fxpro etc provide both type of accounts. So is it that we just go with the right account type among the two ?
Order types are common across platforms. Their existence does not tend to indicate ECN or non-ECN. The fact that they charge commissions makes it sound like and ECN broker to me, though.
Does this mean there are multiple ECN(s) or a single ECN to which everyone connects ? If it is multiple how do we decide which ECN is better ?
There are multiple ECNs. No doubt some are better than others. The bigger, the better. More participants and higher volume means better liquidity. That’s something you’d need to look into.
In Instant execution your orders are executed at the latest price which you see in your platform. While in market execution orders are executed at the broker’s latest price, even if it is different from your platform price. However, in market execution chances of requotes are very less.
ECN brokers do not charge any mark up cost on spreads, they only earn through commissions.
ECN brokers send the orders to liquidity providers.
