Partner Article

Identifying True and top ECN/STP forex brokers

If you are a forex trader then it is essential to know who is a reliable broker and what does it means by true ECN/STP brokerage system. ECN stands to represent Electronic Communication Network. ECN brokers are connected electronically via a network to International banks and other liquidity providers. In case, the forex traders travel through an ECN platforms then they are connected to the International currency market in real time. STP stands for Straight Through Processing. This means right from order placement to closing the deal, every process is accomplished automatically without any sort of manual intervention.

Some of the ECN/STP brokers can easily route your orders to some other market that make profit earning even harder. Therefore, it is quite important for the traders to distinguish between a false and atrue ECN forex brokers and STP broker. Read on to find out how traders can differentiate between true and false ECN/STP brokers

Who Is a True ECN/STP Broker?

A true ECN/STP broker is the one that is connected to at least one of the well known and trusted liquidity providing organization like Citi Bank, Bank of America, JP Morgan to others. They have nothing to do with the brokerage firm and there is no relationship between them as well. The broker will just route your order to the desired liquidity provider. The liquidity providers will make money through the spread and swap and the broker will earn through the commission they will charge you.

Nowadays, mostly the true ECN brokers are connected to several liquidity providers at the same time. When you wish to place an order, the system will automatically choose the liquidity provider offering the best prices and the order will be routed to a specific provider. Therefore, the order will be distributed amongst several liquidity providers and fortunately, none of them will know about your account or go against you when you earn money. This provides the best solution for the traders because they will compete with each other to provide best possible prices.

Some brokers, despite being true ECN/STP brokers increase the spread in addition to the commission they will charge you. What they will add to spread is called markup. None of the providers are allowed to do that unless you know it. Half of the brokers do not inform their clients about the hidden fees, extra charges etc which is a lie! Some of the factors you should keep an eye include Stop Loss, Targets, and Trailing Stop Loss, bonus, scalping, leverage, swapping, spread, negative balance protection among others.

So when you want to choose a broker, ensure that it is a true ECN/STP broker first. Ask them whether they charge markups or not. Ask them for proofs. In case they refused to give you a good answer, don’t open an account with them. Don’t let yourself be-fooled by brokers who are living on money earned from other’s profit shares.

This was posted in Bdaily's Members' News section by Leonid Singha .