Broker to Trading

True ECN can be defined as a broker which aims to find the best price for a Forex pair based on high speed order routes to and from multiple liquidity providers. Using STP (Straight Through Processing) the broker can match orders efficiently. With technology such as fiber optical cables, by physically locating their trading servers in proximity to local liquidity providers (i.e. utilising one or more data centers) the broker can offer processing with low latency (or signal delay).

It should be noted that some brokers do not use the term 'ECN broker' anymore, however there are certain features which can characterise such brokers, such as rapid order processing and no dealing desk conditions, in essence infrastructure friendly to robots and scalpers and news traders. Brokers who offer True ECN conditions can typically offer order speeds as low as milliseconds. This seems very fast, but traders who use True ECN brokers can be seen as attempting to take advantage of the capabilities of technology to deliver speed and accuracy. For a trader who trades on medium term trades this may seem not so important. But as the trade time shortens, then the importance of processing time can increase. This can be looked at this way as well: as the trade frequency increases for a strategy then the time factor can tend to become more critical. But this is not some smooth process, rather it is perhaps a more qualitative process where the trader can look at the type and frequency of a trade and consider whether they need low latency order execution.

There is another factor: True ECN brokers by virtue of the way they process orders typically do not intervene in the order process. Therefore a range of ways to trade which may not be supported at other brokers becomes possible. So the factors of allowing a range of trading styles and the potential to scale a trade via speed and accuracy results in this potential feature of a True ECN broker: that they allow scalable trading to try and tackle the complexity of the Forex market.

The trader may notice that trading Forex with patterns and strategies is problematic as trades frequently do not go the way they are expected to. The complexity of movement in the Forex market makes for a complexity in the outcomes of patterns and hence trades. The trader may look for regularity, rather than patterns as they are understood. So the trader in effect tries to deal more directly with the apparent behavior of the Forex market. Higher frequency trading can be seen as taking this further and trading on very short term moves in the market.

But for the typical trader, a True ECN broker can be seen as offering the potential to trade using online trading robots, as these are typically available and welcomed at these brokers. MetaTrader 4 (MT4) and MetaTrader 5 (MT5) offer Expert Advisors (EAs). cTrader offers cBots and JForex provides robots based on Java (for all these platform the trader can use robots already built or can modify robots or build them). These are automated trading strategies which trade on behalf of the trader.

Typically robots trade on indicator signals, thus really trading as the broker may trade a strategy, but using certain advantages: the potential to increase speed and sustain accuracy, by not tiring like a human trader can and not letting emotions derail a trade. However the disadvantages include that the robots does not exercise discretion and can at high speed and frequency trade in the wrong direction producing rapid losses in the trader's account.

The point really is that the complexity of the Forex market may remain at all scales and the typical trader may find that they wish to try different approaches to it. A True ECN broker allows the trader to try different styles and different way to trade. The brokers chosen in the comparison table offer trading platform suited to both automated and non-automated trading. They are all regulated and each provides a range of CFD markets beyond Forex.