Finances & Money

What is ECN Forex broker?

Simply put, Forex is a market where you exchange one currency for another, at a previously agreed price. A very important aspect of the Forex market is that it is decentralized which means that transactions are concluded quickly, cheaply and are carried out without the supervision of the stock exchange.

Basics of FX trading

Essentially, it is trading mainly based on speculation about the direction of changes in foreign exchange rates. This process is done by buying one currency while selling the other. Where do such decisions come from? The value of the currency may grow and decline due to many economic, geopolitical and technical factors. These changes create an opportunity for earnings, which in turn is water for the mill for speculators.

Forex is a global market, open 24 hours a day, five days a week (from Monday to Friday). The first transactions are concluded on Monday morning in Wellington, New Zealand, however the volatility is clearly limited. However, the situation changes when investors from Tokyo and Singapore enter the game a few moments later. Then the market in London opens and the last transactions are concluded on Friday evening in New York.

On the market, it is common to say that Forex never sleeps. Many may be surprised, it is virtually impossible to conclude transactions on a weekend. Yes, it is true. However, something can happen at any time, which will have a very big impact on the market right after its opening. Let us look at, for example, the parliamentary elections that are held in many countries during the weekend. Their result very often affects the perception of the economy, and thus also the strength of a given currency. Therefore, before the market is opened, one can expect the appearance of a specific directional movement, being

ECN broker reviews

There are different kinds of Forex brokers, between which there are significant differences from the investor’s point of view. ECN is an abbreviation of Electronic Communication Network and is in short a broker who follows the principle of “give me the price that is actually on the market”. The prices that we see with such brokers as traders are exactly the same as at the so-called forex interbank (interbank market), ie the top-level market where banks exchange currency between themselves.

This makes ECN brokers the most “honest” and transparent brokers, because there is no risk involved in manipulating the exchange rate. ECN is only an intermediary that allows us to buy or sell a currency pair looking for an opposite order for us directly on the market created by the banks. In the case of Market Makers (MM) our order first lands at the Broker in the so-called DealingDesk, where the broker decides when the order will be released on the market. There are often delays that cause our loss.

However, ECN brokers also have some drawbacks – this is usually associated with higher costs such as relatively high commission commissions (in addition to the spread itself), or maintaining a high deposit. Most professional traders use ECN services.

 

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Susan Paige

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