Best ECN Forex Brokers 2023
When it comes to choosing the forex broker types, you will find three main broker types: market making, no-dealing desk, and ECN forex brokers. What type of broker you require depends on your trading style and strategy? However, in this article, we will take you through the ins and out of the ECN brokers. Check out our true ECN broker list created by our expert team.
We will provide the ways to pick the best forex brokers for ECN trading along with the advantages and disadvantages of the true ECN broker. So, at the end of this piece of detailed article, you will be able to select your own broker based on our method. Furthermore, you will also get ECN broker list to start your trading journey.
What are ECN Forex Brokers?
ECN Brokers are just like another forex broker that works via electronic communications networks (ECN). However, if you are relatively new in the foreign exchange industry, you may not have enough idea about ECN. So, let’s enlighten you about the ECNs.
It is a sort of technology that connects traders or the retail forex market participants with the liquidity provider, in another word the broker. It is a non-dealing desk operator that enables connection between the parties.
So, the ECN forex brokers allow the clients to access the currency market and equity of other participants. That’s how ECN brokers present the price quotation from different participants. Usually, the brokers work through tighter bid/ask spreads. Nevertheless, true ECN broker work on matching the traders with other market participants. ECN brokers can never trade against the clients. Furthermore, the spreads in ECN are mostly narrower than the conventional brokers. But they charge a fixed commission for each transaction.
Basics of ECN Forex Brokers
ECN brokers work via an automated computerized system that electronically and automatically matches the customers’ traders. For example, if a customer wants to sell 2 lots of EUR/USD at 1.2 per lot and another customer wants to buy the same lot at the same size, the automated ECN system will match these two traders. The broker will not get involved in this trade but traders will do the rest by themselves. However, ECN forex brokers will charge the commission for arranging the match.
Best ECN Forex Brokers List
Understand the ECN System
ECN brokers will look for different quotes, which are also known as price offerings from several liquidity providers. After that, they suggest the provider that has the best spread. ECN brokers tend to offer lower spreads. But the customers should know that the real spread is calculated as the commission charged plus spread.
ECN system doesn’t “make a market.” So, if there are any powerful events in the market that increase the volatility, trading via ECN might be difficult.
Normally ECN forex brokers offer interbank spreads starting from 0.0 pips along with the fixed commission for each lot. The trading cost is considered as an ECN fee.
ECN Trading Platform
The ECN brokers have their own ECN system to conduct the trading. Although the platform will vary on the broker, the basics are the same, and the goal remains the same. The ECN platform aims to match the traders.
However, MT4 introduced a new technology named MT4 ECN Bridge in 2006 with an aim to enable the user to have access to the “interbank foreign exchange market.” Originally the regular MT4 works via connecting the broker and the clients. The main purpose of the bridging software is to connect the “MT4 server to an ECN.” However, the process is a bit complicated. Hence, the brokers prefer using their own platform; it can provide a transparent trading situation.
Standard vs ECN Account
While the standard forex account charges a fixed spread, the ECN account works through the commission free structure, this means the standard accounts don’t impose any commission but have a basis on spreads.
On the other hand, ECN costs include the interbank spreads starting from 0 pip as well as an incurred commission for each lot. However, the 0 pips spread doesn’t indicate that the trading cost is lower, but it will benefit the trader who has a full-proof strategy. Nevertheless, ECN technology is perfect for experienced traders or investors who have large investments.
After considering the above-mentioned facts, standard accounts are suitable for beginners and mid-level traders.
Benefits of ECN
The prime benefit you will get from ECN is that the broker will not make any profit if any of their clients have a net loss in their account. However, the regular forex brokers charge fees even though the trader makes a loss. ECN brokers mainly match the order between the buyer and seller and, after that, transfer the net orders to different liquidity providers. So, this process indicates that the ECN forex brokers and the clients have less conflict of interest.
Top ECN brokers aim to offer automated, honest, fast, and anonymous trade execution.
Although the ECN model charges commission, they normally work via low spreads. Hence, you will certainly get lower trading costs if you trade large quantities.
Nevertheless, the true ECN broker benefits the customer through the inverted spreads. It happens when the bid price is smaller than the asking price. Eventually, this occasion gives an opportunity for the traders to make a risk-free profit.
The most important benefit is that you will not have any kind of conflict of interest with the broker as they don’t earn any profit if you lose your trader. Hence, the ECN system will always try to get you the maximum benefit.
Disadvantages of ECN
While the spreads on ECN accounts are usually low, the small investors might not feel any differences with the market maker broker. Besides, the spreads can be unpredictable depending on the behavior of the market. However, if the liquidity is thin by nature, the spreads might be wide, especially during the major market release.
Another bump you may face is, some ECN forex brokers don’t allow the traders to trade in micro-lots but sometimes enforce a minimum trade size, such as 1 mini-lot. Hence, traders with low capital may need to trade higher position sizes. As a result, they were forced to take an over-leveraged position.
How Do the ECN Forex Brokers Work?
Whenever you place an order, the system will match with other traders as per your buy or sell requirements. When the system finds a match, it will execute the transaction immediately and obviously anonymously. After the transaction is complete, a fixed commission price will be charged and will have a low spread too.
Trading via ECN Brokers
The first-time ECN trader will clearly find the difference with the regular broker. However, ECN trading might be less liquid than the common market maker trading. While the regular brokers usually widen the spreads, the ECN brokers will tend to offer a sudden and a large price jump. Throughout the process, the spread usually remains lower than the market maker broker.
A rule of thumb for ECN trading is, if the liquidity is at the peak, trading via ECN will become most obvious.
Finding the Best ECN Brokers
Finding the best ECN forex brokers is not a piece of cake as you need to follow some criteria. Choosing the broker will depend on your location, the trading size, your trading instruments, how often you trade, and more. All these factors will certainly affect your trading cost. Hence, the different economic models will be applied based on these factors.
Selecting an ECN broker is more or less identical to the regular broker selection process. You don’t need to focus on any special factors while sorting the top ECN brokers.
Initially, you need to ask yourself about three factors before looking for the ECN broker list. They are-
- The amount of the investment fund.
- The instrument or the pairs you want to trade.
- Frequency of your trading.
If you know the answers to these three factors, you will be able to find the top 10 ECN brokers by eliminating the less effective brokers. You will find many ECN forex broker list, that don't meet the minimum requirement. So, you can easily eliminate them.
Let’s start with location; you may feel comfortable trading with a broker that is located in your country or even the broker that you feel comfortable communicating with in your language. While most of the countries are allowed to trade via an offshore broker, US citizens are bound to trade via locally regulated brokers. So, you can narrow down the top ECN forex brokers based on your location.
Regulations and Safety
After your narrow the top ECN forex brokers list, you will need to verify the broker with the local regulatory authority for future safety. Moreover, you may go for further verification to identify if your fund will remain safe or not. You can deposit a small fund initially and observe the behavior of the broker. This small investment will help you to keep a large amount safe in the future.
Trading cost is another crucial factor while choosing the best ECN brokers. But, the cost is variable and depends on your trading amount. Hence you will not get the actual idea unless you start trading. So, you can get an idea by trading with a demo account. Through this, you will know what spread they really impose.
Your trading style may include the number of trades you normally make. Are you a day trader, scalper, position trader, swing trader? All these factors are necessary to determine your trading style as well as to choose the potential broker. For example, if you are a scalper, you will need to pick the best ECN forex brokers for scalping. Additionally, if your trading command depends on any certain economic events or news, you ought to choose the best ECN broker for news trading.
So, define your trading style first and choose the best forex broker according to your trading style.
The next thing you should consider is the forex trading platforms. Check different ECN brokers review to understand how good the platform is. Also, try to know if the platform is easier, please, and intuitive. Opening a demo account with your intended broker will provide you a better idea about the platform.
Finally, you can look at other things, which might not be very important. You may look at the promotional bonuses and other bonuses, transaction method, withdrawal period, customer service, educational platform, and more.
Top 10 ECN Forex Brokers Checklist
- Which regulatory body regulates the broker? There are many regulatory authorities around the world. Some organizations highly regulate the brokers, and some may not put emphasis on strict security. So, if you are looking for offshore, choose the broker from tier 1.
- Does the Broker Contain a Good Reputation? You can study some ECN brokers review to know the reputation of a broker. You may also ask for recommendations from other traders.
- Check the business duration of the intended broker. If the broker has been operating for a long time, you can go for it. However, for the relatively new broker, you can proceed with caution.
- Does the broker offer quick withdrawal? The best true ECN brokers always offer a quick withdrawal. So, if your broker takes more than three business days, you should show concern about this.
- The most trusted ECN brokers should offer you quick customer support. Your trading problem should be resolved in 24 hours or less. While most of the ECN forex brokers offer 24/5 customer service, some brokers provide 24/7 service.
- The best true ECN brokers will offer you a wide range of assets.
Typically, ECN forex brokers fees and commissions are higher than the non-ECN system. But these kinds of brokers are beneficial as they allow the trader to analyze a certain trend in the marker. Eventually, this minimizes the price manipulation as you have all the data in your hand.
But make sure you register with the best forex broker for the ECN network to achieve the ultimate trading experience. And this article will surely help you to choose the best broker.