What is "ECN trading"


I’ve been reading a lot about ECN trading, “to trade at news, trade with a ECN broker” and so on, but i’ve no idea what it is. Anyone care to explain?

It supposed to be the opposite of “dealing desk” brokers, which i have no idea what it is either.

ECN stands for Electronic Communications Network. Essentially you are trading with the real market rather than a market maker. Beware that some brokers that claim to be ECN are not. You can tell if one is because you will need a significant stake (50,000 US for Dukascopy) and you can only trade full lots (min 250,000 with ‘the Duke’)

Don’t take this the wrong way, but if you don’t know the difference between types of brokers, I would suggest you do three things:

  1. If you’re currently trading live, STOP right now!

  2. Go through Babypips’ free school School of Pipsology - - Beginner’s Guide to Forex Trading, Free Forex Education, Learn to Trade Forex, Forex Training - BabyPips.com . It explains brokers as well as many aspects of Forex trading.


Sorry for yelling, but news trading is risky even for experienced traders. Newbies with little or no knowedge and experience would be better off setting their money on fire. The results are the same, but you’ll be less frustrated. :wink:


Well, duh.

  1. No, i’m not trading live

  2. Yes, thankyou i’ve completly missed that one. It’s not like there’s a tab saying “school” at the top of the page, which i’m ignoring.

  3. I wouldn’t

I’m trying to learn here… it ain’t getting better if you start to yell things. And YES, i am a newbie. Maybe you could help me out instead.

Back to the topic, sigh… If you are tradig ECN, who is then regulating the spreads?

To gryat :

Please don’t bite back at In2Blues. He has taken the trouble to reply to you and is genuinely trying to help you.

Now Tonymand has made an excellent start in answering your question.

Most people use “bucket shop” or dealing desk brokers. Here you [U]pay [/U]a spread and the broker sets up the prices for you - you are not trading in the real interbank world but in the broker’s own price world which is different from the interbank price world.

Your order is warehoused together with all the other orders and your broker sets up the prices you buy or sell at.
The broker gets his profits by charging you a spread - usually around 3/4 pips for the 4 majors, higher for exotic currencies.

The bucket shop brokers can play tricks on you :

-freeze your internet connection.
-reject your order and offer you a new on (at a loss to you) “requoting”.
-trade against you and chase after your stop loss setting.
-email you to tell you that your profit trades were invalid.
-take money out of your account for all sorts of things.
-and much more.

An ECN broker is considerably more honest. He charges you a genuine commission that is taken from your funds. The pips then are all yours (sometimes charged 1 pip).
But the big thing with an ECN is that your trade directly with the interbank market and not in some broker’s artificial world. you see the bids and asks and you can operate directly on these.

To see an example of an ECN website and see the difference you could
look at …say…

EFX: Experience Forex Freedom

[U]example only.[/U]

But there are many ECN brokers.

Okay, thank you, that was a good reply. I’ll keep on looking.

Just to add to what Tymen has said. No one is regulating the spread on an ECN they are entirely dependant on the real bids and offers in the market and can change dramatically if liquidity dries up. I use both an ECN and a market maker as there are pros and cons with both and the latter has some advantages for certain types of model that I trade

A.k.a, a hell of a lot things more to learn :slight_smile: But hey, i’m not complaining, i choose this. Very glad for the support though, soon i’ll be the master at this. Well at least on a theoretical level :slight_smile:

When i’m profiting of this, i’ll donate som money money here… alltough you don’t seem to need it that much, judging from what the bloggers make a week

Sarcasm. I like that. Probably just the way I would respond. :smiley:



You asked a basic question about brokers, so I naturally assumed you hadn’t been through the school. I just wanted to let you know it was there to help you learn.

You’d be amazed at how many people trade live – and lose money – before learning the basics. A quick read through some forums will tell you how common it is.


That’s what I was trying to do by pointing you to the school. If you don’t take things so personally, you can learn a lot more.

Tymen and Tony have done their usual excellent job of explaining that.

If you’d like to learn a little more about Market Makers vs. ECN’s, take a look here:

Market Makers & ECN�s, Is the grass greener?


Thanks for the hyperlink - I put it in my favourites and have learnt from it.

Called EFX and found out you can open account with minimun of US$400 and they will charge $5 for a standard lot + numbers of pips of the spread. i asked what the spread for GBY/JPY and he checked and told 1 pip.
THat’s not bad for $400 on ECN trade.

for a standard lot that isnt bad, but it may be more for a mini. standard lots are usually 100,000.

sorry for the dbl post but also on standard lots they usually give you a better deal on the spread.

The spread is the same for everyone except high volume traders, who do get a lower spread.

As for commissions, it’s $5 per thousand traded, round turn.

That means when you buy a standard lot of EUR/USD, you pay $5. When you sell it, you pay another $5.

If you’re trading mini lots, then it would be $0.50 each way.


sorry i meant less by this. my mistake

An ECN trading is an electronic communication network that is being provided by most brokers. In ECN all trading activities are anonymous and so enable traders deal on neutral prices that reflect real market conditions that is traders have direct access to market prices.

Genuine ECN brokers will not trade against you because your trades will be passed directly to a bank or to another customer on the side of the transaction. But traders need to pay commissions for each transactions.