Author Topic: ECN/STP  (Read 1420 times)

Offline firebreathz

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« on: April 02, 2020, 12:55:46 pm »
How to find a reliable ECN/STP broker?
It is important to understand that most retail forex brokers are market makers. While the ECN model is profitable for the broker on both winning and losing traders, it also carries additional costs and generates less profits from losing traders. The broker must run a very powerful computer network with high speed connections and maintain a good relationship with several liquidity providers in order to be part of a good ECN with low spreads and fast execution. In addition to that, the broker's markup or commission is only a part of the total spread because the liquidity provider has its own spreads. If a trader loses all his money by paying spreads (assuming he doesn't win or lose a single pip during his trading sessions until he goes bust), a market maker would take all the trader's money. In contrast, a STP broker will win only a part of it, while the liquidity providers will earn the rest.

Considering the above, it is no wonder why most brokers prefer to operate only as market makers and sometimes hedge the trades of very profitable traders. The costs associated with direct market access are also the reason why micro and mini accounts are always provided in a market-making environment where the broker will always be your final counterparty.

Fortunately, the best forex brokers know there is also a very lucrative market for high rollers who trade very high volumes and can generate very good profits under an ECN/STP system. Such traders are also very risky to trade against, so the ECN model is in the broker's advantage because it is risk free. This is why some brokers are giving direct market access to the traders that choose to open the standard or VIP accounts.

The DMA accounts will always have fractional pips (the spread can be 2.7 pips for example) and will never have fixed spreads. Real market conditions where liquidity providers compete against each other to offer better spreads will always result in variable spreads that tend to be lower when there is little volatility and will increase in time of high volatility such as during news. The size of one lot for the EUR/USD pair will always be 100,000. Mini lots and micro lots are never used by liquidity providers.

I will list a broker that offer very competitive ECN accounts for big traders. They are the one I consider to be the best choice available right now.

ECN account type was created for professional traders, who require best possible trading conditions of all that are available. The main differences between advanced ECN accounts and standard ones are tight spreads, from 0 pips, and the commission for performed transactions, which depends on their volume. Several types of assets are available for trading on ECN accounts, such as currency pairs, cryptocurrencies, metals, and other instruments popular with traders.

You can trade with the high speed of order execution through MetaTrader 4/5 and cTrader platforms. Extensive information about all types of ECN accounts can be found in "Trading accounts" section. In addition to that, a detailed description of a special account type for premium clients is available on "Prime accounts" page