ECN vs STP/NDD Broker

Trading Discussion
#1

Are ECN brokers better in every way over STP/NDD brokers?

I ask because I read an article that said “Market Execution” (which I think is ECN) cannot enter TP and SL amounts during the entry of the trade (this includes EA’s). The article said that a TP or SL can only be entered AFTER the position has been established.

Is this true?

Currently I use an EA that I wrote to trade with. That EA sets the TP when the trade is entered. I’m a swing trader and hold until TP is achieved so the SL is not an issue for me. But my EA will have to be recoded if I switched to an ECN broker and the above is true.

Also… Are there ANY other pros or cons to ECN over STP/NDD? I’ve read around that spreads are thinner with ECN but I have not seen it personally. I’ve noticed that spreads (on Indicies anyway) seem to be about the same – .50 for SP500.

FYI – I only trade index products, so if you could apply your answers to Index CFD’s instead of pairs, I would appreciate it.

Thanks!

#2

i’m with pepperstone
i trade US2000 Primarily

You can modify T/P and S/L after you enter and during the trade .
the spreads are usually close to 0 pips on Indexes

Hope that helps

#3

Thanks @anon81929759, so you are saying that the text entry fields for TP and SL are not greyed out when entering a trade?

That’s great to know! Thank you.

#4

that’s correct
they are always there.
the only time they are greyed out is …

When you enter , say into a BUY position,
at a price of 1.0040
and say you want to put your take profit at 1.0000
well then… it will be greyed out because you are in a BUY trade

but other than that, it’s always there

#5

STP - Straight Through Processing

STP Forex brokers send orders directly from clients to the liquidity providers - banks or other brokers. Sometimes STP brokers have just one liquidity provider, other times several. The more the liquidity providers - and therefore liquidity in the system - the better the fills for the clients. The fact that traders have access to the real-time market quotes and can execute trades immediately without dealer intervention is what makes the platform STP.

ECN - Electronic Communications Network

ECN brokers pass on prices from multiple market participants, such as banks and market makers, as well as other traders connected to the ECN, and display the best bid/ask quotes on their trading platforms based on these prices. ECN Forex brokers additionally allow orders to interact with other orders. They provide a marketplace where all participants (banks, market makers and individual traders) interact inside the system and get the best offers for their trades available at that time. Unlike fixed spreads, often offered by market makers, ECNs spreads vary, depending on the pair’s trading activities. During very active trading periods, you can sometimes get no spread at all, particularly in very liquid currency pairs. These brokers make money by charging customers a fixed commission for each transaction. Authentic ECNs do not play any role in making or setting prices, therefore, the risks of price manipulation are reduced for retail traders. True ECN brokers display the Depth of the Market (DOM) showing order sizes in the system

#6

Thank you @A1lenTrader for the explanation.

I’ve noticed that with ECN brokers the stop out rules are usually set much higher by the broker than with STP brokers. For example, I’ve noticed some ECN accounts with a stopout level of 80 while with the same broker the STP account is set to 15 or maybe 25. In addition, the leverage is typically much lower with the ECN accounts vs. STP (100 vs 200 or 400+).

What is the reason for this?

Also… It seems that ECN brokers would take longer to get fills since there is more involved than with STP brokers. Is that correct? In that case, why do people suggest to go with ECN?

Lastly, I’ve been looking at LQDFX as a possible broker to move to. They have on their website that they don’t charge any swaps for Indicies. They do charge a commission, and the spreads seen to be better than a lot of the other brokers too. So, how can they not charge any swaps? I’m not sure how that would work if they are only charging a commission. If the trade was to hold the position for a long period of time, wouldn’t they then lose money from the providers charging a swap? They are showing no swaps with their MICRO and their ECN accounts which is where the confusion is coming from.

#7

There are different margin requirements for differen instruments Forex is usualy 0.1% / 0.2%

CFD;s are Different higher Margin from SpreadBeting account. also the leverage is higher too yes

A True ECN/STP may not fill your exact price because it depends on the liquidity providers prices at that time on the Network .
a not so good STP broker may only have 1 liquidity provider and it might be a small bank or another sister company.so your order will be filled because they control their prices.

A TRUE ECN/STP will charge or credit swaps and charge a small commission.

It’s finding a decent broker thats the tricky bit.

ECN = Network of different liquid providers

STP = Maybe small pool of liquidity thet they control if its a (dodgy broker)

The main difference is is the commission. On ECN accounts traders are charged a fixed commission for opening and closing trades and spreads depend on the prices of liquidity providers. On STP accounts no commission is charged but the mark-up is added to the spread of liquidity providers.

LQDFX looks like Market Maker not very good reviews

Where are you based.??

#8

I’m located in Canada. The brokers here are not very good in the sense that the leverage is only 30:1 for Indicies. I’m not looking for large leverage for the purpose of buying larger lots. I’m looking for larger leverage so I don’t get stopped out. I buy small lots and hold them until my profit is hit. However, I need larger leverage to ensure that if there is a pull back of 2-5% in the market that I don’t get stopped out. I’m okay with large drawdowns, just don’t want to get stopped out to crystalize those losses.

So, I’m looking for either very low swaps, or hopefully no swaps. A commission on entry is fine. The lower the spreads the better.

LQDFX is listed on Going offshore to escape the CFTC as an STP/ECN broker. And they have an ECN account listed on their website too.

Do you have other suggestions?

Also, I should state that I trade using an EA that I coded. It uses market orders. So, if I’m concerned with spreads, I could easily program not to enter a trade unless the spreads are where I’m okay with them. I’m typically not entering more than 1 trade a day, some days I might get 3 or 4 round trips in, but most times I might enter 1 trade for the day. It might close the same day, next day or take a few. In periods of consolidation or pull back it can go longer before I get out though.

#9

I said that I buy at market, but I should clarify.

My EA enters a limit price based on the Ask and closes a position based on the bid.

#10

If you want True ECN you will pay commission and swap
Otherwise it’s STP
Have you looked at IG / Pepperstone ??

#11

@A1lenTrader, I have looked at both IG and Pepperstone but unfortunately they are not available to Canadians. Which is what led me to LQDFX.

#12

Not got alot of choice Have you .

#13

Did you Look at LMFX…?

https://www.lmfx.com

#14

Yes, I did look at LMFX. They have a Canadian division which falls under the IIROC regulator in Canada. However, IIROC stipulates that the largest leverage they can give is 30:1 or something like that.

I was considering them though but I can’t buy 0.01 lots with them and based on my trading strategy their minimum (1.0 lots) is way too much. My account would zero out fast based on that.

#15

FXCM OR Forex.com seems to be likely choice.