ECN or STP? Which broker have best spread?
Best low-spread brokers are STP/ECN NDD, but no idea how best spread is.
Both acronyms you posted if implemented correctly offer market execution. So spreads they show are of little or no value.The important is what the price they fill your order in in relation to the one you see on the screen when requesting.
The market execution model has ability to show you spreads you want to see and execute your trades at spreads(prices) they want to execute it at:)
To get the broader picture I would recommend to read the below for the in-depth coverage of execution models by #InsideMan.
#TradeSafely
ECN Broker is a broker per-se, one who gives you a direct access to display your order in the market. This broker’s income comes from a certain mark-up on the spread displayed to you: for instance if the current actual spread on a EURUSD pair is 0.2 pips, this broker might display you a 0.5 pips spread making 0.3 pips on every trade you make. So their Spreads are usually higher.
STP Broker is a type of a Market Making broker. This broker, most of the time, displays its own quotes (which are correlated to the actual inter-banking quotes).
Now here is the real complexity: sometimes this broker routes your orders to the market (acts as an STP broker) but sometimes it doesn’t (acts as a Market Maker).
So it depends on how greedy the broker wants to be.
ECN is just a fancy name for STP.
I find broker with good conditions
I started trade with liteforex. this broker is ECN broker and minimum sum for deposit for ECN is 500$ i think it is good because before i find STP broker with minimum depo 1000$ it is so expensive for me
Hi Karloss,
I am not sure what is your strategy or trading style but spread is not the most important criteria in many cases when choosing a broker.
There are many other issues you have to pay attention to.
I wish you good searching,
ZR
Thank you for your advice! Can you tell me about which issues you are talking?
If you buy a pair of shoes, what is more important:
- Paying $120 for a good quality shoes that you might wear for years
- Paying $40 but it might be ruined after 2 weeks
Which one do you prefer? The story with the spread often similar.
Also question is from where you are coming from.
Is carry trade important for you? What margin do you prefer? And regulation? Leverage?
These are some of the questions you have to know the answer
Once again Mr Gone is the only one to make sence.
Got to wonder if people read. Take for instant their brokers PDS.
Here’s a couple of extracts from a “True” ECN broker with apparant access to 50+ liquidity providers and the “dark pool.”
CFDs are sophisticated, high-risk, over-the-counter derivatives issued by ******. They are not exchange-traded
Why people don’t understand this I’ll never know. But here’s the important bit
Typically there are two types of CFD models the Direct Market Access Model and the Market Maker model.The Direct Market Access model results in a corresponding trade in the Underlying Exchange for the instrument over which the CFD is based. On the other hand the Market Maker model uses the price of the Underlying Instrument on the relevant exchange to determine the price of the CFD however a trade may not necessarily be executed in the Underlying Exchange.
****** offers its CFDs based on a modified Direct Market Access pricing model. ****** makes hedge contracts at around the same time as it issues the CFD to you by making a corresponding hedge contract with its Hedge Counter party (not by placing orders directly into the market). ****** does not itself seek to make a market or speculate. ******s’ Hedge Counter party may in turn choose to hedge directly into the market or it may make a market in its pricing to ******, depending on the market for the underlying investment and the exchange hours.******s’ bid and offer prices to you are based on the corresponding prices offered by the Hedge Counter party to ******.
Generally the prices of ******s’ CFDs are set on the trading platform to give competitive pricing but you should be aware that ****** is responsible for setting the prices of opening and closing CFDs. ****** does not act as your agent to find you the best prices.
Now I’m not going to explain it. I think the key is in the first quote and the last line. You trade over the counter contracts. Your broker is always your counter party regardless how they manage your risk. Your broker is not your agent and never has your interest at heart.
Spread is just the difference in the bid and ask price your broker (not the market) sets. Don’t read to much into that than needs be. If you don’t like your brokers spread get another one. Read their PDS and understand what it is you are trading and how they (your broker)manages your risk.
With which broker you trade?
I’m in Australia. Think we are blessed with our brokers with many to choose from. Personally I use IC Markets and to date can not fault them
Do you hear about liteforex broker?
How do we know our broker is exactly ECN or STP ?
So you haven’t listern to what we said have you bro. Go read your brokers PDS. That will tell you how they operate
Different brokers offering ECN accounts will have different spread. You can check them in real time on any of the better forex-related websites (like myfxbook for ex.)
Just find a broker with a good reputation. That is far more important that the spread (of course the spread has to be a decent one). One good broker that I can recomend, to start with small capital is Pepperstone.
Compare it and you shall find out.