Hello there fellow traders,
I was curious as to exactly what the difference between an ECN broker and a ‘regular’ one was. From my initial searching, it seems to be that the ECN broker charges a commission, while the ‘regular’ broker does not.
Would this be correct to say?
Thanks in advance,
xXTrizzleXx
I guess by regular you mean market maker?
If so then one of the differences is that a ecn lets you trade with other traders, meaning if there is no other trader to buy what you are selling or sell what you are buying your order is not opened at that price. Also they say that you are anonymous with an ecn broker, meaning they can not see your stops or limits and trade against you.
In a market maker account that broker will buy what you are selling and sell what you are buying if no one wants it at that price. Pretty much take the other side of your order. You can see how this might go bad for you the small guy.
I see, thanks for clearing that up for me.
However it would seem to me that there would be times with an ECN that there might be no traders who want to buy what you have to sell (or vice-versa) at the price you have stipulated.
Would market maker brokers thus be viewed as more…how to say this…‘guaranteeable’ since they will ALWAYS buy and sell from/to you?
Thanks in advance,
xXTrizzleXx
Sure they will take your trade… but would you rather play some guy off the streets in a card game, or the play against the house? The house will always play, cause they can ride out your small wins waiting for your big loss. Hope I dont sound jaded, market makers are good for small cap traders. Just dont expect to get rich trading with them.
ECN is actually every available participant
connected to that ECN bridge. The bulk
of your orders will be routed to a huge
liquidity provider (list of banks that broker
has set up relations with, other brokers
listed as liquidity provider, and fellow
traders both institutional and retail) and
not just to another fellow
trader. And that liquidity provider will
fill your order. You are not sitting around
trading with your fellow traders in the ECN
environment. The real difference between
ECN and market maker has nothing to do
with what is “guaranteeable”. It simply
has to do with higher liquidity and faster
execution at a much better fairer and a
transparent pricing scheme. And of course
total anonymity since the liquidity provider
do not see you at all and your broker
does not care either since they are making
a commission off of your trades. And the
term commission is a misnomer since the
market maker also gets a “commission” in
the form up marking up the spread. I would
much prefer to pay a commission and do
my trades in a full ECN environment. I do
all of my trades at Dukascopy.
Fo Shizzle ma Trizzle, Word Yao.
Since I like the cut of your Jib, I will spend some of my precious and valuable time explaining the Realities of Spot Currency trading. 
Back in the day, when Dinosaurs roamed the earth and Moby was a minnow, Spot Currency traders had to call their trades in to a bank dealing desk. You would talk to a trader, and you would make a Request For Quote (RFQ), they would then tell you what was available as far as size at your price, now if you waited too long to decide, and the market moved to far, then they would re-quote you the price that was available, (Re-quote).
Now lets say you liked the size and quote, you would then make a request for trade (RFT), the trade was placed and you had the position. The interesting thing about this is that you could actually develop a relationship with the trader, which is kind of cool.
Then came the electronic revolution in trading, and the Buzzword was ECN, electronic communications networks, wow was that easy, spotting and targeting the AXE, and following him around, almost as easy as SOES Banditing. Anyway I digress.
So now the Spot Currency brokers adapted to the electronics, this meant extinction for the dealing desks, while most brokers at that time still filtered the trades through a Desk, causing re-quotes etc, there were those who forged ahead to get the dealing desk out of the way and move on to pure electronic matching. Some of the first Brokers, (market maker/ Clearing House is a more accurate term) were Interactive Brokers, OANDA, MB Trading.
Now did this ECN designation mean that there was a centrally traded marketplace, with full transparency? A resounding NO, each Market maker acted as its own Exchange/Clearing House, just like CME Clearing, acting as a buyer to all sellers and a seller to all buyers. And since there was and still is very little central oversight, all sorts of weird things happened and could still happen. For example re-quotes, different prices with different “Brokers”, spikes in data (OANDA recently had one) widened spreads during reports, announcements etc, etc.
Now some will say that “Fixed Spread Brokers” are dealing desk brokers and ECN’s are not. Not true, with a fixed spread broker, a spread is added to the price, this spread might be called a “minimum” spread, by some but in reality it is still fixed, in other words, if they say “minimum .5 pip spread”, it means that the spread will only go down to .5 and never to choice, choice means same on bid and ask, this spread is added and fixed by electronic means and is never touched by a dealing desk, so they can technically say they do not use a dealing desk, “yeah thats the ticket” but they do use computer programs to accomplish the same thing, “Hello McFly”.
So now you have the “hybrid” broker, a small fixed spread and a commission, and also dynamic spreads. This means that even though a “Broker” says they execute ECN “Style”, if the price does not go to choice, it is still a fixed spread.
The reason I post this is due to the fact that there are people running around saying that in a retail account you execute directly with banks, this is just plain wrong, and if they don’t know how it really works how can you trust them with other things. You must read the agreements to understand how your broker works, if an NFA regulated “Broker” says you will execute your Super Micro Mini Account against a bank, hedge-fund etc. Then you ASSUME they are telling the truth, but in most cases, while the settlement might be against other traders, Banks etc. The execution is against the “Broker/Exchange/Clearing House”. This in itself is not a problem, as long as your “Broker” fills your price, it should not matter a lick to traders if the trade is settled with a Bank, Hedge Fund, Trader, or the “Broker” themselves.
But you should understand clearly how it works.
Of course this is all my opinion and no one should construe this as financial advice, trading advice, solicitation for any funding, trading or investing. Before trading always consult your broker or an investment professional.
So there you have it. To me the most important things I look for in a Spot Currency provider are the following qualities.
NFA registered.
This all applies to the USA only and I would not send funds overseas unless the Govt here shuts down Spot Currency trading here, and if I was so inclined it would be in GB and nowhere else.
Who is in charge of the company and are they NFA registered and do they have any licenses
Do they qualify for SIPC
Do they segregate client funds from company funds ( Search REFCO)
Can you get in touch with a live person if there are Issues, and not the emails that go on for months.
Is the platform reliable, in demo and live.
You may have to put some money down to get a look at live data, I had to deposit 5k with this Interactive broker just to find out their data holes like swiss cheese, and the platform was, well, not great.
How is their back office, accurate statements etc. Can you talk personally with accounting?
Finally, price. To a new trader this is the last consideration, you need a reliable broker, it is NOT all about price.
Now I am tired, oh by the way did you know that you cannot post Mobys’ second name, hehehe silly filter not even whales can be called ****
The Ever Receiving My First Infraction And Savoring The Moment VIPER
P.S. Racism I tell you, definite cultural bias against "Height Challenged Icelandic FEMALE Singers, ooooo I’M telling the tabloids, or is that hemorrhoids
I believe that an ECN brojker is much better than a regular broker and that is because a real ECN broker is connected to the actual forex market they have lower spreads than the a regular broker, ECN brokers has low slippages because they show the real prices, but the regular broker sometimes cannot supply the requested price and you get a requote/slippage that increases your loses. I suggest that you try the ECN demo such as Alpari or Sunbirdfx and compare the executions with the regular broker.
So do you get less slippage with ECN? I’m wondering what kind of startup capital you’d need though to make it worth it.
ECN brokers - low spreads, good quotes and liquidity. No, you are not going to be sitting around with an open trade, waiting for someone to pick up what you are selling or buying.