History & Relevance of ECN Forex Trading
What are ECN brokers? ECN stands for electronic communications network. It is a term given to any broker that offers trading services over the telephone or the internet. A common use for these types of services is for finance companies, banks, and financial institutions.
In order to understand what an ECN is it is important to first define what a Forex broker actually does. ECN brokers is a Forex trader who doesn’t deal in actual money or physical bullion. Instead, an ECN broker works with E-Commerce merchants who want to process credit card transactions online. An ECN is just one aspect of the Forex business. There is more to it than meets the eye. The fact of the matter is that most FX investors are dealing with more than one type of broker when they trade on the Forex market.
When you are trading on the forex market, you are typically dealing with three brokers instead of just one. You will have a standard account, which will be the most common one used by most people. Your second trading platform is known as a premium or discount trading account. This type of trading platform is reserved for high risk individuals or businesses that cannot qualify for a standard account.
The third platform is known as the execution service. This is the part of your ECN Forex Broker that actually provides the trading and clearing services to your clients. Execution is what makes your broker money, because you pay real forex brokerages for their services. The more service they offer, the more money you can expect to make. These services include execution, settlement, and maintenance of your account. Most ECN brokers will provide you with both of these services for free and may charge you a small fee for the execution services.
Execution is where the real action of trading occurs. It involves a broker buying or selling a specific amount of foreign currency and then getting the difference between the bid price and the asking price. This price difference, or spread, is the ECN’s profit. Most ECN brokers will either offer you an execution or a platform that will allow you to execute your trades on their platform. If you go with a broker that offers execution for free, you may not always be able to get this service, so you need to carefully consider this fee before signing up for an account with them.
Another factor in choosing an ECN Forex Broker that interests you is the type of deposit you would like to set up. Most ECN brokers will allow you to open a practice account. This will let you practice making trades and learn how the market works. Once you feel comfortable enough to start making real trades, you can open a real money account. These types of accounts usually have a significantly smaller fee than what you would pay with a broker.