The concept of ECN in the financial market appeared relatively recently in 1999. In the CIS financial market the first ECN accounts appeared only after 10 years. ECN accounts are based on the principle of exclusion of all intermediaries, including broker. Traders themselves find counterparties with which they are most comfortable to work. The broker acts in this system only as a trading platform.
ECN Account Benefits
This system of trade and interaction in the financial market carries a huge number of advantages:
- Open market. All transactions and deals are available for viewing. Everyone can go in and see the deals they’re interested in. This openness and general availability of history on slang is called «glass of orders». Such a system allows not only to carry out direct transactions with various counterparties, but also to assess and analyze the real situation in the foreign exchange market.
- There are no restrictions. Each member of the ECN network selects the counterparty with which the transaction will be concluded. Thus, there is a real opportunity to choose the most profitable offers.
- High volatility. This openness of the system generates a floating spread. As a consequence, there may be large hikes in quotations, both in one direction and in the other. It doesn’t happen on standard forex accounts. For a professional trader, such races are a great opportunity to earn money.
- High reliability. All the above advantages were appreciated by the largest financial institutions and banks. The presence of such large counterparties in the system strengthens the already high reliability.
It can be seen that forex ECN accounts have a huge number of advantages, which are actively enjoyed by all traders of the world.
Deficiencies In ECN Accounts
Despite all the advantages of ECN, it has a couple of significant flaws that prevent it from becoming the dominant system:
- Complexity of work. In order to trade in plus in the ECN account system, you need to have a lot of experience in trading. The rookie will be very uncomfortable here and, with a greater probability, he will remain with an empty deposit.
- High entry threshold. Brokerage agencies have no interest in providing access to ECN accounts to small players, as the broker receives a minimum commission for providing a trading platform.
Working with ECN forex accounts is quite complex, though it can bring great returns. But truly all advantages will be appreciated only by experienced traders. If you have just started to get acquainted with the world of currency speculation, you need to gain experience and start trading on standard accounts.