Even taking into account the collection of commissions in the case of ECN brokers these continue to be very low costs, as are the spreads. This refers to a group of brokers who only act as intermediaries and do not get involved in user negotiations as counterparties.
The logic of an ECN broker starts with locating a user to act as a counterparty in the trades of its clients. The ECN broker will match this user with the highest bidder. In the case of a sale, the broker will be responsible for finding the appropriate buyer to complete the transaction. Thanks to this method, a large number of conflicts of interest that can arise between the broker and its users are avoided.
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The broker is responsible for transferring these market orders to the right person and from there asking for a percentage commission. The question of whether the trader is making a profit or a loss on this transaction is already external to the operation of the ECN broker. ECN brokers make this common complaint on the part of their users, as the platform makes a profit even when their users are losing money. This usually occurs as a result of them proceeding with murky order strategies or is the result of simple denial of use related to certain trading techniques that are beneficial to the trader.
In this field there are issues such as scalping , hedging, among others.
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The point is that the more trades traders make, the more profit ECN brokers make. This is why the ECN broker is not interested in the techniques used by its users or their efficiency. ECN brokers are currently the smartest choice for many professional traders, especially daytraders. In addition, the DMA technology of direct access to the market, allows you to access the prices of various liquidity providers, thus ensuring that there are no re-quotes and that the execution price is exact to that of your order.
There is a lot of controversy surrounding the question of whether many of these brokers are true ECN brokers or is it pure marketing. These sopn some of the bad practices of brokers who pretend to be ECN brokers, but do not actually offer a real ECN account:. This broker, most of the time, displays its own quotes which are correlated to the current interbank rate. For example, successful traders or successful trading algorithms will automatically be directed to the market while smaller or losing customers will not. This model is also responsible for all re-quotes and order rejections.
When you open a large order the broker directs it to the market, but the prices there may have already changed the market moves very fast sometimes — so the broker is exposed to 2 options: reject the order by asking you to adjust the prices or complete the order by taking the risk that it could end up in a successful trade which means that the broker will have to pay you from his exchange.
Well, it is easy to recognize an ECN broker: the minimum capital required and the ability to see not only the bid and ask price but also the amount on either side of the price depth levels is the most remarkable feature of an ECN. Probably not. It is very difficult to distinguish between these 2 and most of the time brokers use a hibrid model anyway. Most regulated brokers in the US and UK will not trade against you in a way that will cause you to lose money, not because they are moral but because it may cause them problems with their license. Choosing an ECN broker is not much different from choosing any other broker, so here are the main factors to consider so that you can choose the best ECN broker for your needs.
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You may feel more comfortable investing with a broker located in your own country or in a country that speaks the same language as yours. On the contrary, if you live in Europe, Latin America or the UK, you have it easy to get started as quickly and easily as possible with a secure broker, as European regulations are the safest and most protective of investors. This means that if you deposit that amount or any lower amount with a regulated broker in the UK, if you were the victim of a robbery, a scam or even if the broker went bankrupt, your money would be protected by the UK government.
This is a key advantage and provides a lot of peace of mind for the vast majority of investors, which is why the UK is considered the most reputable financial centre. One of the best ways to compare spreads between platforms is to open several demo accounts at each of the brokers you may like to see what their spreads really are. Another important aspect to consider when choosing a broker is your trading style and frequency. You can access hundreds of educational videos and workshops and even individualized private sessions with mentors.
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