Hello
I’m a little confused regarding ECN/STP brokers, so hopefully someone can shed some light on it.
From my limited understanding, ECN/STP brokers are not market makers and don’t take the opposite side of your trade. However, I’ve seen some posts here and elsewhere saying that almost every broker (even the ones that claim to be ECN/STP) are market makers, and that the true ECN/STP brokers are the ones that require a large amount of deposit, something like at least $100k, is that true?
No, it isn’t true. A properly regulated broker would keep client funds segregated from their funds by holding them in national banks. IC markets and other AUZ markets do the same, as do FCA brokers in the UK.
i dont think thats true. there are regulations which keeps an eye on everything and if the complaint is received a broker have to pay a large amount what i know. chance are the non regulated brokers can do that.
Probably the majority of brokers out there are market makers but you have to weigh up what’s most important to you from your broker.
If you’re scalping for tiny pips on very short duration trades you will probably need an ECN broker for competitive spreads and to avoid the risk of them competing with you head to head on a trade. If you compete with a broker head to head you will lose.
But if you’re trading long-term and your typical stop-loss distance averages 1 x ATR14 the broker can net off the risk using the other positions that other traders took in the opposite direction. You’re not forcing the broker to take action here. And the odds of them spiking a price feed by tens of pips are much less - remember that if they suddenly drop price to hunt one stop, they lay themselves open to a buy at a huge discount from all their other clients: they risk getting slaughtered.
But make sure your broker is strictly regulated by a tough regulator like the UK FCA who will hammer the broker in a case of stop-hunting. The best protection features to hunt out are -
Interesting post to follow
Not every broker is market maker. Too expensive licence. Not every broker can afford that.
Yes, you probably would need $100k to have access to good trading conditions. Being ECN/STP doesn’t mean they are going to provide better trading conditions than a market maker.
This was very helpful, thank you so much!
No, there is no truth in the statement that all brokers are market makers. If you fear that all brokers are market makers, you better choose ECN brokers over other brokers that you find in the market. You will at least be sure that your broker won’t trade against you.
no that’s not true. all the brokers are not ECN, the regulations keep a check and the trades are being monitored.