What is ECN trading?
Understanding more regarding ECN trading
The forex brokers South Africa have embraced the new technology of ECN in forex trading. Due to the advancement in technology, the small retail investors are in a position to trade their financial markets, and in the process, are able to compete with large financial institutions. One of the main markets for the smaller traders is the forex market, whereby, you are free to take advantage of currency pair’s price fluctuations. What makes it to be quite popular is because it is the largest as well as the most liquid market which exists in the world.
Forex trading does not take place on an exchange which is regulated like the shares or other assets because it happens between sellers and buyers from all over the world through the OTC – over the counter market. For you to access the market, you have to use a broker such as the forex brokers South Africa.
Because the market is not in any way centralized, you will be able to recognize that you can be in a position to access various exchange rates and the conditions for trading, depending on the broker you utilize.
For such a reason, to choose the right broker for your style of trading is quite important in being able to become a forex trader who is successful. It is necessary that even if there are a variety of brokers in the market who are offering the same services and products, there are few things that you need to check before you decide which one you are going to use to be sure that you are going to give yourself the best chance of succeeding
The first thing that you should do is to ensure that you are trading with a broker who is a regular. If you get a forex brokers South Africawho is registered with 8 regulators, including Germany, USA, Spain, Australia, Canada, and the UAE, then you are in safe hands. Additionally, to being regulated heavily, they follow strict rules as well as obligations which regard the funds of clients and the security. For example, you can find that they make sure that the accounts of clients are fully segregated with a negative balance of protection to the clients.
Apart from having to check the forex broker’s regulatory status, you also require to be sure that it is able to offer you the right trading platforms and the trading accounts for your trading styles not mentioning other details like the trading conditions, the minimum deposits, spreads, payment methods, the main currency of the client’s account, and the technical support availability.
Another thing that is important is to consider when you choose a broker is the type of broker which they have as there are different kinds predominately, the ECNs and the market makers.
The Market makers vs the ECN broker
To understand the definition of a market maker is something that is known to be quite straightforward. It refers to the broker who tends to make the market by having to set the bid and to ask the prices through own systems. They go ahead and display the prices through the platforms which they have so that the investor can be able to open and then close the trading positions.
Normally, the Market Maker broker will not be able to hedge the position of the client with other providers of the liquidity such as the ECN broker will be able to do. Instead, the Market makers normally pay the client positions which are winning out of their own personal accounts. It also denotes that when the client has a trading position that is winning, a Market maker broker then loses.
With the ECN broker, which denotes electronic communication network – ECN, it is the type of broker who provides the traders with a direct access to the rest of the market participants through interbank trading prices. It is a network which allows the sellers and the buyers who are in the exchanges to find a counterparty of their positions in trading.
When you utilize providers of liquidity, an ECN broker will be able to allow the prices from the providers to compete in the same auction, meaning that the traders get prices which are better and cheaper conditions for trading. Moreover, when you use an ECN broker, the traders normally trade in a more transparent and efficient environment.
In majority of the cases, the way the ECN broker tends to make money is with having to do with the trading volumes of the client, to charge a commission on every position.
Why you have to trade with an ECN broker
The ECN broker does not trade against its clients and only act as an intermediary between your selling and buying orders, being able to match you up with various market participants. Thus, an ECN broker does not bet against you, meaning that it doesn’t take the other sides of your trading positions.
It is a trading model which ensure you that there happens no conflict of interest because an ECN broker is able to get a commission whether you lose or make money. When you use an ECN broker, it tends to limit the price manipulation, increasing transparency and provides trading conditions which are better.
The ECN broker does not make the market through creating own quotes, it is hard for manipulation of prices to take place, just because it utilizes prices from various liquidity prices. With the ECN brokers, you will have an access to current information, real-live, and much more history of accurate prices, thus the reason why it is very difficult for this particular broker to end up manipulating prices.
Displaying the prices by use of sources which are official transparently in the trading platforms of the ECN broker makes it quite easy to trade on an instant basis, with spreads which are tighter as compared to other types of brokers. At the same time, you will be able to get fees which are quite low and commissions also immediately there is a confirmation.