Direct from the desk of Dane Williams.
I’ve mentioned and recommended choosing an ECN forex broker quite a lot on this blog, so it’s time I went into more detail on specifics.
What is an ECN forex broker, you ask?
An ECN forex broker, otherwise known as an electronic communication network (ECN), is a business model where client orders are passed into the interbank market via liquidity providers, automatically matching them to the most efficient price available.
You can trust that ECN forex brokers have your best interests at heart because their business model is structured in a way where they profit from their client’s trading volume.
As such, they want you to keep trading day after day.
And the only way you’re going to keep coming back is if you have a proper trading education as a foundation and ultimately are consistently profitable.
This is in stark contrast to a market maker forex broker who instead of passing orders to the interbank market via LPs and making money on volumes, they instead actively trade against their clients.
The prices you see on a market maker’s trading platform aren’t real.
They’re nothing more than an overlay of the underlying market that they offer their clients and only they can trade.
What this does is give the market maker the ability to see where their order book’s stops are clustered and actively hunt them for their own profit.
Your loss is their gain, so of course they’re going to actively try to cheat you!
Avoid like the plague.
Why choose an ECN forex broker?
Now, for those of you venturing into the world of forex trading or pondering a switch in brokers, comprehending the difference between ECN forex brokers and market makers is paramount.
As such, let me delve deeper into what makes ECN forex brokers the superior choice.
The bottom line is that ECN forex brokers operate transparently and fairly.
When you place an order with an ECN broker, it seamlessly enters the interbank market via liquidity providers.
Ensuring that your order is executed at the most advantageous market price.
What sets ECN brokers apart is their genuine commitment to your success.
They profit when you trade, creating a symbiotic relationship where your gains translate into their gains.
Consequently, ECN brokers are motivated to provide the necessary support, education and trading environment for you to flourish.
Contrast this with market maker forex brokers who employ a different approach.
Instead of routing orders to the interbank market through liquidity providers, market makers actively trade against their clients.
The prices displayed on a market maker's platform don't accurately reflect market conditions.
They're nothing more than a chirade created exclusively for their clients.
This setup grants market makers a distinct advantage.
They can identify clusters of stop orders within their book and exploit them for their own profit.
In essence, your losses become their gains, creating a clear conflict of interest that in no way aligns with your best interests.
As you embark on your trading journey, remember that selecting the right forex broker is your initial crucial step.
Evaluate transparency, align your interests and consider the support offered by ECN forex brokers.
Make an informed decision to enhance your chance of making consistent profits in the forex market.
Best of probabilities to you.