What is true ECN

RahmanSL

Major
Messages
2,527
florentin29, in a nut shell:

True ECN (Electronic Communications Network): ECN Forex broker provides a marketplace where all its participants (banks, market makers and individual traders) trade against each other by sending competing bids and offers into the system. Participants interact inside the system and get the best offers for their trades available at that time. All trading orders are matched between counter parties in real time. A small trading fee - commission - is always applied (@copy right 100forexbrokers.com)

ECN by association: The most popular MT4 trading platform was created as a Dealing Desk software and not meant to be used for ECN trading.
To allow MT4 support ECN trading (which becomes Level 2), Brokers have to or need to form a bridge to a true ECN platform (which normally do not use MT4 trading platform but have their own in-house trading platform.) But some true ECN Broker (like Dukascopy) are beta testing MT4 platform with a view to adopt and offer MT4 to their future clients.

Outright Bucketshop: A lying, thieving, scam bag, deposit-only Broker who is out to take/scam your hard earned money.
Read up on those labeled “Scammer Brokers” in FPA and stay well2 away from them. Would advice you to read the brokers’ reviews section in FPA and elsewhere before deciding on a broker.

For further information, I would suggest the relevant section in FPA and also over at 100 Forexbrokers site.
 

newl2

Recruit
Messages
2
Hello and thank you for the useful information.

I have a question too though.

I've just opened an account at an ECN broker (deltastock.com) and they have what they call 'Level II' or 'L2'. In addition (I think) a trader is able to select from a number of liquidity providers via their ECN. What I don't understand is what IS 'Level II' or 'L2' and what am I seeing when I'm looking at 'Level II' or 'L2'? What I'm saying is: how does this benefit me as a new trader? I hope I'm asking my question correctly and that it makes sense.
 

RahmanSL

Major
Messages
2,527
Level II ECN is where you get lower pip spread than if you were to sign up for a STP or Micro account. Lower pip spread means your trade gets into profits faster, and this is especially good if you do scalp trading.
 

newl2

Recruit
Messages
2
Thanks for the reply.

I understand that now (I've noticed that sometimes the spreads are very low which is good obviously). But I can also see what I believe is called 'Market Depth' i.e. the 'last' ten (I think it is) orders with quantities and pricing and what I'm trying to figure out is what this means and if it benefits me at all (and if so how does it benefit me and what am I supposed to be looking for)?

Thanks again for the reply.
 

WinFX

Private, 1st Class
Messages
38
Who are the quotes providers and who is the opposite side of the trade?
A true ECN passes on your order into the market. They never take the other side of the trade. Usually its other market participants (like big banks) who take the other side of the trade.
Also when you trade via true ECN your stops should not be visible to the market, so they can`t hunt your stops
 

Svetkata

Recruit
Messages
8
"Hi What do you mean about some brokers lie about that?”

In plain simple English, that means some (probably most) Brokers claiming to be ECN are lying to their clients…hence ECN would (in that sense) stands for Electronic Con for Newbies who don’t know any difference : )
Through my 11+ months in forex, Dukascopy is the only one that is true ECN with many other Brokers using them as market liquidator.
Most other Brokers claiming to be ECN is in fact misleading unsuspecting traders (mostly Newbies & gullible). Read the fine prints on your "ECN" Broker to find out whether they are "True ECN", "ECN by association", or outright Bucketshop.
There area a lot of Brokers making all sorts of false claims and some (ForInvest for example) will unashamedly claim to be the "Best Broker of the Year" and Swiss registered.

All ECN platforms should have variable pip spread as the Broker charges commission (fee) for every trade that is made regardless of whether the trade is profitable or not.
None ECN Brokers will have fixed pip spread as their commission and they stand to earn more money if your trade losses money as they will trade against you (i.e. take an opposite trade to your trade). In plain old English, if you win in your trade, your none ECN Broker losses money. If your trade losses money, your Broker makes money.
Hi RahmanSL, Thanks so much. It may sound silly but I still don't get it. When you say market what and who do you mean. I came across a broker and on their ecn(demo) i could see bank names quoting and dealing. I could give a link if you would be willing to give an example of how to do such homework or small print reading.

Thanks very much much indeed what you said so far has been very helpful
 
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