The advantages of an ECN trading account
ECN trading accounts are considered as the most cost-effective solutions in the industry, offering several advantages to currency traders. Even though at first, ECN accounts may seem somewhat more complicated and costly, they actually offer greater reliability, transparency and much lower trading costs.
The truth of the matter is that the forex market isn’t a regulated and centralized exchange such as the stocks and indices markets. Instead, currency trading is conducted over-the-counter and a forex broker is required to facilitate all orders and match them with their counterparts on the network.
In fact, there are so many liquidity providers contributing their rates to the network that different brokers may end up offering different trading conditions – some more competitive than others.
However, some regulated brokers offer clients access to ECN accounts which provide currency traders direct access to prices that are typically only available to major banks. This is why ECN accounts are so popular in trading the markets, even though they usually come with higher entry requirements.
These ECN accounts offer different terms and trading conditions in terms of spread and order execution and depending on your trading method, you may find that ECN offers a much better experience than your standard trading account.
ECN benefits and drawbacks
The main advantage of ECN accounts and why they are so commonly popular is, of course, the lower spread offering and nearly instantaneous execution of orders.
Opening a position on a standard trading account immediately starts in the red, because of the spread. This is how you pay your broker for facilitating all your trades and spreads aren’t a fixed amount either, so in volatile market conditions, where the bid and ask prices start fluctuating rapidly, the spread widens and can become quite substantial.
High frequency trading, or scalping, which is a popular trading strategy among traders can sometimes be difficult to be made profitable due to the spread. If spreads are high, then the price needs to move by a larger amount of pips in order to turn a profit and therefore trading through ECN where spreads typically start from 0 pips is much more favorable.
If you are wondering how the broker makes a profit when spreads are so low on ECN accounts, then you need to look at the commission. Trading on ECN incurs a fixed commission for each lot traded and while spreads can vary when the market is volatile enough, the costs are often much more competitive than trading on a standard account.
Also, since ECN trading takes place between the trader and the live market, there is no need to worry about requotes or slippage since it’s guaranteed that you will be getting the best price available on the network.
However, it’s important to note that traders who employ trading robots or Expert Advisors to open their trades for them, would likely prefer trading on a standard account since these tools usually can’t take into consideration these commissions.
ECN trading accounts at CM Trading
CM Trading offers unique trading account types, each catering to the needs of traders of different experience and skill levels.
You can open an ECN trading account with CM Trading by registering for a Gold which becomes available with a $10,000 initial deposit.
Trading on ECN with CM Trading provides you with access to razor sharp spreads starting from 0.1 pips on EUR/USD and a 200:1 leverage ratio.
Interested in trying out the best trading conditions we have to offer?
Open an account today and contact your trading specialist to request further information regarding our ECN offering.
Register here to get started!