Understanding ECN Forex Trading & Its Advantages

ECN forex, which is an acronym for the Electronic Communication Network, is the future of forex trading. In simple terms, ECN Forex Trading can be described as a bridge that links the small participants in the market with liquidity providers who belong to Tier 1. This is done through an ECN forex broker.

The connection between traders and liquidity providers is achieved using a sophisticated technological system that has been named the FIX Protocol, which stands for Financial Information Exchange Protocol. The ECN forex broker acquires liquidity from providers in the tier 1 category and then makes this available to other clients so that they can trade forex. The broker also does the job of delivering all orders that he receives from the client to suitable liquidity providers so that they can be executed.

A forex broker charges a commission amount for every transaction that he makes, which serves as the broker’s source of income. Thus, the more the broker’s clients trade in forex, the more will his profit be.

Variable Spreads

A general forex broker will offer you both variable and fixed spreads, but in ECN forex, you can only use variable spreads. In variable spreads, the difference between the buying and selling prices of any currency pair fluctuates within a specific range. A floating spread is directly correlated with liquidity. If this increases, so will the range. Thus, a floating spread is low when the forex market is inactive.

Advantages of ECN Forex Trading

An ECN forex system offers many advantages such as:

You remain completely anonymous in all of your forex trading activities. This provides you with the benefit of dealing with neutral rates that are a reflection of the real forex market conditions. They are not, in any way, dependent on the strategies or tactics that you use or on the existing market positions.

You can instantly trade forex by using live streaming, which guarantees you the best possible prices that instantly receive confirmation. There is no need for a “last look” or anything of this sort as all trades are finalized and validated instantly when you make them. The concept of revised quotes does not exist in ECN forex trading because there isn’t a direct dealing desk, so no interferences of any sort are caused.

You can easily make trades on international liquidity, which is provided by the leading banks and the topmost financial institutions in the world.

You can connect your risk management system and trading models directly to the feed that provides market data. Thus, you can enjoy the best possible buying and selling prices that are available at that time.

Generally, forex trading involves fixed spreads, but with ECN forex, you can use variable spreads, which provide you with direct access to the prices. This allows you to trade through tight bids that are as low as 1 pip if the market is under normal conditions.

ECN Forex Trading with IMMFX

IMMFX is committed to providing its clients with the best trading conditions possible. To this end, we now offer different accounts to suit the specific requirements of different traders.

The ECN Account accommodates the experienced retail traders. A key feature is the flexibility in position sizing. The limit for a single trade size is 1000 lots. There is a minimum trade size of 0.1 lot and the trade size increment remains reasonable at 0.1. The ECN Account uses the MetaTrader 4 platform as well as any of the available mobile trading platforms.

Learn more about IMMFX Ecn account and trading facilities.