The difference between an ECN account and an ECN Pro account
-
amir - Blog
amirIntroduction:
With the development of technology and the increase in the flow of transactions in the financial markets, various types of trading accounts have been created. ECN (Electronic Communication Network) and ECN Pro accounts are among these options, which are especially attractive to professional traders and investors.
ECN and its meaning:
ECN stands for “Electronic Communication Network”, computer exchange and means “electronic communication network”. ECN brokers connect traders with liquidity providers such as banks and financial institutions through an electronic network. ECN allows traders to trade with transparency, speed and low spreads. Integrating and combining rates announced by several market agents is one of the most basic functions of ECN, so ECN clients pay less spread (difference between Bid price and Ask price) in most cases. The best announced rates from various market participants are automatically collected and thus the orders are executed. Most of the orders registered through ECN are limit orders.
ECN is not limited to only large exchanges when they run. In other words, this ECN trading system allows to operate at other times, such as outside business hours and forex trading. Some ECNs are set up specifically for investment institutions, while some types of ECNs are tailored to the needs of retail clients and traders. In general, ECN stands for fast order execution, passive order matching and automated trading, allowing traders to trade with transparency, speed and low spreads.
In this article, we will examine the main differences and features of these two types of trading accounts in the forex market.
ECN (Electronic Communication Network) account:
An ECN account is one of the popular models in the financial market that allows traders to execute their trades directly on the market. The main difference between this type of account and other accounts is that transactions are done electronically and without intermediaries. Some of the ECN account features are discussed below:
– Execution of market transactions:
In an ECN account, trades are executed on a market basis, meaning that orders are executed quickly at the best prices available in the market.
– Low commissions:
Traders may pay commissions as a fee for using an ECN account. These commissions are usually lower than other accounts.
Advantages of trading in ECN forex brokers:
In an ECN account, trading is done directly between market participants and there are no second parties involved. Traders trade at neutral prices, which reflect actual market conditions. These prices are not created artificially against the clients trading strategy or tactics.
A significant reduction in transaction costs is another advantage of ECN accounts. With an ECN forex account, a trader only needs a computer and an internet connection to execute orders and perform other trading activities.
In order to directly register orders in ECN conditions, the trader must subscribe to an ECN account. Then the trader can make trades through the network. In ECN mode, customers have direct access to market prices. The announced prices are constantly fluctuating due to the difference between supply and demand and other conditions. Order execution in ECN is realized when the price of a buy order and the price of a sell order coincide with each other.
Who can subscribe to ECN?
Usually, trading institutions and brokers can subscribe to ECN, and individual traders must open an account with a brokerage to be able to trade under ECN conditions.
If a trader wants to subscribe to one of the popular ECNs, then it will be possible to make transactions according to his liquidity, and the cost of transactions will also be reduced. In other words, in this way, the trader executes his orders at the best price and with the lowest cost.
Different ECNs each consider discounts for their customers. In some cases, with the increase of liquidity by the trader, a discount is given to him. On the contrary, in other cases, a discount is paid in case of a decrease in liquidity, but at the same time, transaction fees are also charged, contrary to the practice of other ECNs. Some ECNs offer more discounts (or lower fees) for high volume trades and if the trader’s performance reaches a certain level.
From a trader’s point of view, it is beneficial to trade through a broker that provides direct access to the market and offers reasonable discounts and fees. In any case, the ECN trading fee depends on the volume of transactions and is not fixed and uniform. If the transaction volume is low, the trader pays a small fee corresponding to that transaction.
How many categories are ECNs divided into?
Electronic communication networks are generally divided into two categories, one of which is “Light Pool Markets”. These markets are accessible and visible to the public and include almost 50% of the total trading volume of the stock market. In front of this category is “Dark Pool Markets”.
The function of ECNs is not Dark Pool from the beginning, but some of them provide their subscribers with access to parts of Dark Pool.
ECN Pro account
ECN Pro account is an advanced version of ECN account and is designed for professional traders and experienced investors. This type of account offers a number of features that traders with more sophisticated strategies can take advantage of. Some of the features of the ECN Pro account are discussed below:
– Special commissions:
ECN Pro traders usually pay special and lower commissions due to their high volume trades.
– Less spread:
This type of account allows traders to have the lowest spread.
Differences and choice:
The ECN Pro account is a more advanced account than the ECN account that exists in some brokers such as “Forex Chief”. In this type of account, excellent trading conditions and zero spread fees are provided for traders. ECN Pro account has differences from normal ECN account which are:
– Pro account lower spread than ECN
– Faster execution of orders in the Pro account
– Minimum deposit more in Pro account equal to 500 dollars
– More variety of CFD trading symbols in the Pro account
Now that we have covered the main differences between an ECN and ECN Pro account, traders and investors should decide which account is more suitable for their strategies. The choice can depend on the trader’s experience, trading volume, and trading style. An ECN Pro account is suitable for experienced traders with high trading volume, while an ECN account may be best for beginner traders with smaller balances.
Conclusion:
Finally, ECN accounts and ECN Pro are two great options for financial markets traders. Their main differences are in their capabilities and costs depending on your needs and trading strategies.
