ECN Forex Trading in General
ECN means Electronic Communication Network and it is a common way of trading the global Forex Market. Actually, ECN trading creates an electronic bridge between Tier-1 liquidity providers (for example Banks) and smaller market participants (for example retail Forex Traders). This bridge is created through an ECN Forex Broker who charges trading commissions for offering his services.
Characteristics of ECN Forex Trading:
1. Variability of Spreads and the Lowest Spreads
2. Full Market Depth and High Liquidity
3. Instant order execution (no delays)
4. Automated Forex Trading (API Trading)
5. Anonymous Trading
ECN Forex Brokers
Some traders see ECN trading as the best way to trade Forex, others prefer to trade the market using STP Forex Brokers or Market Makers.
Advantages of ECN Trading
ECN is a system designed to avoid the role of a middleman when executing a Forex order. That means that traders who have access to ECN trading are able to participate directly in the Forex market. The theoretical advantage of ECN trading is that traders are not executing orders against their brokers as in the case of Market Makers Brokers. ECN brokers are offering high liquidity, fast execution, and narrow trading spreads and that is why they are preferred by professional traders. Because of the narrow spreads and the high execution speed, ECN brokers are the best choice for day-traders and especially scalpers.
Disadvantages of ECN Trading
Here are some disadvantages of ECN Trading:
1) ECN brokers are usually charging trading commissions (for example $30-$50 per $100,000)
2) The minimum deposit required in ECN Trading is usually a little bit larger than Market Makers or STP Forex Brokers.
Dukascopy SWFX Marketplace
A nice way to trade ECN is using Dukascopy which has developed its own market called SWFX. Dukascopy offers a wide variety of Trading Platforms including the self-made JForex Automated Platform which allows Forex Robots (Expert Advisors). Normally Dukascopy charges 1.0 pip spread on EUR/USD but it can get to even 0.20 pip (EUR/USD).
What is ECN Forex Trading