I hope this reminds you the basics you should know about Forex market participants, how they operate and what should you expect from them. The main purpose of this thread is to discus Market Maker and Electronic Communication Network brokers.
ECN is a network of market participants such as banks, market makers, companies and standalone traders. All of them provide liquidity and share the best bid/ask prices. An ECN broker connects his liquidity providers (the more the merrier) and provides full market depth. A true ECN broker has no conflict of interest with the client. Contrary, the broker is interested, that a trader has a long and happy trading life. The bigger the capital a trader earns, the more and the larger transactions he makes, the more transaction fees he pays. Sounds good doesn’t it?
So what is holding all traders from switching to ECN brokers? The lack of basic knowledge. They are undereducated about the brokers and this produces the imaginary disadvantages. Moreover, traders are accustomed to Market Makers, switching one for another, expecting they will find the best one. But, as sad as it may be – they won’t. It becomes clear, when you realize how Market Makers function. I adore a simple and plain explanation about MMs and ECNs. Market Maker is just like a casino, you gamble versus the casino – sometimes you win, but most of the time you lose. As everyone knows – casino always wins. In most cases, market makers have no liquidity. You do not trade outside their brokerage company. What you get is a Forex simulation with the illusion of liquidity, expecting to win, but the broker puts all the effort for you to go down. The more you lose the more they gain.
As for the ECN brokers, their like a poker tournament. You play versus all the other players and your results depend only on your skill. Just as simple as that.
The traders and brokers are stuck in the constant loop. The same trading platforms, the same offers and most importantly the same problems. Even if you will get the proclaimed bonus to your account, you will inevitably lose it together with your capital. And then begins the blaming game. If people would understand the nature of MM’s they wouldn’t blame them. It’s just how they operate.
Considering the fact, that the future of Forex trading belongs to Electronic Communication Network (ECN) brokers, there should be some major brokerage companies evolving and proposing ECN trading opportunities to traders looking for it. Many reviews and comparisons about MM vs. ECN indicate some of the disadvantages of the ECN –huge capital required to trade, variable spreads and big transaction fees, bad trading platforms. These arguments are completely outdated.
Nowadays, you don’t need a truckload of greenbacks to trade ECN. Most of the brokers provide mini accounts – you’ll need about 400 - 1000 dollars to start trading. About perfect for beginners and traders who want to test out the ECN environment.
Variable spreads, well, they might be a little upsetting at times. But this is the real Forex market environment. Fixed spreads are irrational. They cannot be fixed, that is the nature of the spreads. They move, depending on the market conditions. They might go high up to 1-2 pips or higher, but they can go as low as 0,4 or even less. Taking this into account it’s not so bad is it? Scalpers should be jumping high into the air clapping. Low spreads is the Market Maker bait for them. But they can never offer spreads as low as ECN’s. Depending on your trading experience and style, variable spreads shouldn’t be an issue for you either.
Let’s look into the transaction fees. Let’s say, that you are trading EURUSD and the spreads are as low as 0,4. You open a 100k position and pay about ~3$ for it. Would you dare to compare this cost of transaction with costs of a Market Maker? I guess no.
So why does the future belong to ECN? It is just inevitable. In the near future, the people will be switching to ECN brokers; the market maker times are long past due. This will happen, when traders’ perception about market participants will increase. People should discuss, write and read more about the market participants. Every single trader, starting from the beginner, should know full well, when choosing a broker, whether it is an ECN or an MM broker, what should he expect and how the broker operates. Question every statement and proposal your broker presents. There’s no such thing as free money.
There is more than enough deception, false promises and fake material about Forex in the internet. The majority of traders are totally clueless about differences of the brokers and they only start looking for answers after they have emptied their accounts. Basically there are no pros or cons for neither of the brokers. They are different from the core and people trading with them should choose them, not by mistake, or by being deceived – only by their personal preference and understanding.
Put some effort and analyze every single aspect and option before opening an account with a brokerage company. It is your money. Don’t give it away so easily.
ECN is a network of market participants such as banks, market makers, companies and standalone traders. All of them provide liquidity and share the best bid/ask prices. An ECN broker connects his liquidity providers (the more the merrier) and provides full market depth. A true ECN broker has no conflict of interest with the client. Contrary, the broker is interested, that a trader has a long and happy trading life. The bigger the capital a trader earns, the more and the larger transactions he makes, the more transaction fees he pays. Sounds good doesn’t it?
So what is holding all traders from switching to ECN brokers? The lack of basic knowledge. They are undereducated about the brokers and this produces the imaginary disadvantages. Moreover, traders are accustomed to Market Makers, switching one for another, expecting they will find the best one. But, as sad as it may be – they won’t. It becomes clear, when you realize how Market Makers function. I adore a simple and plain explanation about MMs and ECNs. Market Maker is just like a casino, you gamble versus the casino – sometimes you win, but most of the time you lose. As everyone knows – casino always wins. In most cases, market makers have no liquidity. You do not trade outside their brokerage company. What you get is a Forex simulation with the illusion of liquidity, expecting to win, but the broker puts all the effort for you to go down. The more you lose the more they gain.
As for the ECN brokers, their like a poker tournament. You play versus all the other players and your results depend only on your skill. Just as simple as that.
The traders and brokers are stuck in the constant loop. The same trading platforms, the same offers and most importantly the same problems. Even if you will get the proclaimed bonus to your account, you will inevitably lose it together with your capital. And then begins the blaming game. If people would understand the nature of MM’s they wouldn’t blame them. It’s just how they operate.
Considering the fact, that the future of Forex trading belongs to Electronic Communication Network (ECN) brokers, there should be some major brokerage companies evolving and proposing ECN trading opportunities to traders looking for it. Many reviews and comparisons about MM vs. ECN indicate some of the disadvantages of the ECN –huge capital required to trade, variable spreads and big transaction fees, bad trading platforms. These arguments are completely outdated.
Nowadays, you don’t need a truckload of greenbacks to trade ECN. Most of the brokers provide mini accounts – you’ll need about 400 - 1000 dollars to start trading. About perfect for beginners and traders who want to test out the ECN environment.
Variable spreads, well, they might be a little upsetting at times. But this is the real Forex market environment. Fixed spreads are irrational. They cannot be fixed, that is the nature of the spreads. They move, depending on the market conditions. They might go high up to 1-2 pips or higher, but they can go as low as 0,4 or even less. Taking this into account it’s not so bad is it? Scalpers should be jumping high into the air clapping. Low spreads is the Market Maker bait for them. But they can never offer spreads as low as ECN’s. Depending on your trading experience and style, variable spreads shouldn’t be an issue for you either.
Let’s look into the transaction fees. Let’s say, that you are trading EURUSD and the spreads are as low as 0,4. You open a 100k position and pay about ~3$ for it. Would you dare to compare this cost of transaction with costs of a Market Maker? I guess no.
So why does the future belong to ECN? It is just inevitable. In the near future, the people will be switching to ECN brokers; the market maker times are long past due. This will happen, when traders’ perception about market participants will increase. People should discuss, write and read more about the market participants. Every single trader, starting from the beginner, should know full well, when choosing a broker, whether it is an ECN or an MM broker, what should he expect and how the broker operates. Question every statement and proposal your broker presents. There’s no such thing as free money.
There is more than enough deception, false promises and fake material about Forex in the internet. The majority of traders are totally clueless about differences of the brokers and they only start looking for answers after they have emptied their accounts. Basically there are no pros or cons for neither of the brokers. They are different from the core and people trading with them should choose them, not by mistake, or by being deceived – only by their personal preference and understanding.
Put some effort and analyze every single aspect and option before opening an account with a brokerage company. It is your money. Don’t give it away so easily.
Anywhore, what broke are you using? 
