Choosing an ECN broker

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Johan's picture
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Choosing an ECN broker

As ECN trading demands high investment, choosing an ECN broker is a critical decision so that your investment may not go in vain. These days selecting a right broker is really hard when hundreds of ECN brokers are out there and each one claims to be the best.

ECN brokers are usually preferable because of three main reasons i.e. direct dealing between traders and market participants, lowest spread (this make it best for scalpers) and fast execution of orders. Whenever it comes to selecting an ECN broker, make sure you will get what is mentioned before. According to my research, following are some main things that should be considered whenever you select a broker.

·         Beware of those brokers who advertise themselves as commission free. No broker can do business without earning commission, as it is the sole source of their income in ECN accounts. Brokers are quite intelligent and the broker who is claiming as commission free must be earning from bid spread or by acting as a counter party to your offers. So it is better to check if the broker is earning commission or not.

·         Never ever commit to the ECN brokerage firm you first come across with. Research well on trading forums and ask fellow traders to recommend a reliable ECN broker. Read online reviews and learn from experience of your fellow traders. This way you can save yourself from the trap of false traders.

·         Commit only with the broker who offers Straight through Processing (STP). STP guarantees that the broker is taking your money direct to the interbank market to give you the best price.

·         Before opening a real account, experience it through demo account first. See if the trading platform is user-friendly or not.

Apart from these, I would still like to know if there is any other thing to see while choosing an ECN broker.

What is the best approach to select an ECN broker?

And how to deal with the situation if you end-up in selecting a wrong broker?