I have become pretty suspect about a few fx brokers that I've traded with over the past few weeks who state that they have an ECN foreign exchange offering. Naturally trading with an ECN forex provider is the ultimate as you're certain to receive the very best spreads in the marketplace and you can place huge deals. It seems to me that there are allot of small fx brokers round the place who have jumped on the ECN bandwagon and are calling themselves an ECN forex provider when all that they are doing is takinganother brokers ECN price feed and making a market on this price themselves in order to profit from their clients losses.
It's often difficult for new traders to be able to select the real ECN forex brokers from the bunch when these days there are so many fake ECN fx brokers out there. To help brand new forex traders in determining whether or not a fx broker is really an ECN broker or simply a broker taking a price feed from someone else. Below I've outlined just a few simple tests that you can perform.
Tests
1. Is there a minimum distance that you can place your take profit and stop-loss orders away from the current market price?
2. Will your forex broker slow or freeze price updates?
3. Do your brokers graphs differ from the price shown on your deal ticket?
4. Will your broker only pass on negative slippage?
5. Does your forex provider accept deals larger than 5 standard lots?
Is there a minimum distance that you can place your take profit and stop-loss orders away from the current market price?
A True ECN provider will have no limits on the distance that you can place your stop-loss and take-profit orders away from the current market price. Market maker forex brokers apply this minimum distance rule to avoid scalpers and day traders from taking money from the forex broker when trading intraday. True ECN forex brokers do NOT aim to take advantage of forex trader losses they're motivated by flow only, meaning the more frequently you buy and sell currencies the more money you make, this is primarily why they charge a commission and will NOT have any limits on your deal placement.
Does your fx broker slow or freeze pricing updates? In a real ECN environment there are a huge number of price updates each minute which means the prices a True ECN forex provider will show ought to change quite allot as prices are set in the ECN market place. Brokers which are NOT true ECN brokers are not likely to show all of the ECN price updates since it reduces load on their servers, after all they do not need to show all pricing updates as they're NOT passing on the orders to the ECN market place anyhow but instead warehousing them internally.
Do your brokers charts differ the bid price displayed on your order ticket?
Several brokers that are NOT True ECN fx brokers adopt a piece meal approach to their Metatrader 4 setup and simply plug in an ECN price feed to their current NON-ECN Metarader 4 offering. When fx brokers do this it means that the graphs will not reflect the prices that the ECN price feed exhibits. This is what one would call a "Sticky Tape Offering" as there has been little effort shown by the broker to setup their Metatrader 4 environment properly. Brokers who's setup exhibits this characteristic are NOT likely to be have a True ECN foreign exchange offering.
Will your forex provider only pass on negative slippage? A lot of traders are convinced slippage is negative aspect of fx trading, however this is in-fact NOT true. Slippage is quite normal even inside a True ECN environment however the slippage that happens will work for you in addition to against you. Slippage that works in your favour is known as positive slippage and slippage that works against you is often called negative slippage. Sadly some fx brokers exploit this and add a couple of pips to the negative slippage and simply don't pass on any positive slippage at all. A tell tale sign of a fake ECN fx broker is one that does NOT pass on any positive slippage.
Will your forex provider agree to orders larger than 5 standard lots?
A True ECN environment is intended to offer traders with deep liquidity from the many participants. Of course if a broker is showing ECN prices but is in reality a market maker forex broker then they will simply not be able to pass on all the advantages that a True ECN has to provide. A good test is to simply put a huge trade on to determine whether or not it gets accepted or rejected, a True ECN forex broker will have no problems taking on a trade that's 5 standard lots in size.
I have performed these 5 straightforward checks on over 50 different fx brokers around the globe and my findings were actually quite shocking. Out of in far more than 50 different fx brokers who say they are ECN brokers. I have found that there are only 8 fx brokers that pass all 5 tests and could be regarded as a True ECN broker. Of these five forex brokers only three offer the Metatrader 4 platform to their customers.
I'm not in a position to tell you which forex provider suits you best as each forex trader has separate requirements, however out of these 3 brokers I've personally chosen to deal with IC Markets simply due to their pricing and very quick order execution speeds.
It's often difficult for new traders to be able to select the real ECN forex brokers from the bunch when these days there are so many fake ECN fx brokers out there. To help brand new forex traders in determining whether or not a fx broker is really an ECN broker or simply a broker taking a price feed from someone else. Below I've outlined just a few simple tests that you can perform.
Tests
1. Is there a minimum distance that you can place your take profit and stop-loss orders away from the current market price?
2. Will your forex broker slow or freeze price updates?
3. Do your brokers graphs differ from the price shown on your deal ticket?
4. Will your broker only pass on negative slippage?
5. Does your forex provider accept deals larger than 5 standard lots?
Is there a minimum distance that you can place your take profit and stop-loss orders away from the current market price?
A True ECN provider will have no limits on the distance that you can place your stop-loss and take-profit orders away from the current market price. Market maker forex brokers apply this minimum distance rule to avoid scalpers and day traders from taking money from the forex broker when trading intraday. True ECN forex brokers do NOT aim to take advantage of forex trader losses they're motivated by flow only, meaning the more frequently you buy and sell currencies the more money you make, this is primarily why they charge a commission and will NOT have any limits on your deal placement.
Does your fx broker slow or freeze pricing updates? In a real ECN environment there are a huge number of price updates each minute which means the prices a True ECN forex provider will show ought to change quite allot as prices are set in the ECN market place. Brokers which are NOT true ECN brokers are not likely to show all of the ECN price updates since it reduces load on their servers, after all they do not need to show all pricing updates as they're NOT passing on the orders to the ECN market place anyhow but instead warehousing them internally.
Do your brokers charts differ the bid price displayed on your order ticket?
Several brokers that are NOT True ECN fx brokers adopt a piece meal approach to their Metatrader 4 setup and simply plug in an ECN price feed to their current NON-ECN Metarader 4 offering. When fx brokers do this it means that the graphs will not reflect the prices that the ECN price feed exhibits. This is what one would call a "Sticky Tape Offering" as there has been little effort shown by the broker to setup their Metatrader 4 environment properly. Brokers who's setup exhibits this characteristic are NOT likely to be have a True ECN foreign exchange offering.
Will your forex provider only pass on negative slippage? A lot of traders are convinced slippage is negative aspect of fx trading, however this is in-fact NOT true. Slippage is quite normal even inside a True ECN environment however the slippage that happens will work for you in addition to against you. Slippage that works in your favour is known as positive slippage and slippage that works against you is often called negative slippage. Sadly some fx brokers exploit this and add a couple of pips to the negative slippage and simply don't pass on any positive slippage at all. A tell tale sign of a fake ECN fx broker is one that does NOT pass on any positive slippage.
Will your forex provider agree to orders larger than 5 standard lots?
A True ECN environment is intended to offer traders with deep liquidity from the many participants. Of course if a broker is showing ECN prices but is in reality a market maker forex broker then they will simply not be able to pass on all the advantages that a True ECN has to provide. A good test is to simply put a huge trade on to determine whether or not it gets accepted or rejected, a True ECN forex broker will have no problems taking on a trade that's 5 standard lots in size.
I have performed these 5 straightforward checks on over 50 different fx brokers around the globe and my findings were actually quite shocking. Out of in far more than 50 different fx brokers who say they are ECN brokers. I have found that there are only 8 fx brokers that pass all 5 tests and could be regarded as a True ECN broker. Of these five forex brokers only three offer the Metatrader 4 platform to their customers.
I'm not in a position to tell you which forex provider suits you best as each forex trader has separate requirements, however out of these 3 brokers I've personally chosen to deal with IC Markets simply due to their pricing and very quick order execution speeds.
About the Author:
ECN brokers are not really difficult to find in Forex and IC Markets, the problem is finding a true ECN brokers . You can visit here to know more about it.
No comments:
Post a Comment