Friday, August 29, 2008

Forex trading broker


ECNs

Pros:

You can usually get better bid/ask prices since they come from several sources

Variable spreads between bid and ask may give no spread or tiny spreads at times

If they are a true ECN, they will not be trading against you but will pass on your orders to a bank or another customer on the other end of the transaction.

You will be able to offer a price between the bid and ask with a chance of it getting filled

If they support Stop-Limit orders, you can prevent slippage during news by making sure that your order either gets filled at the price you want or not at all

Prices may be more volatile which will be better for scalping

Cons:

Many do not offer integrated charting

Many do not offer integrated news

Many of the trading platforms are less user-friendly

Because of variable spreads (between bid and ask,) it may be more difficult to calculate stop loss and profit target in pips beforehand.

Examples of some ECNs*:

http://www.mbtrading.com

http://www.efxgroup.com

http://www.hotspotfx.com

http://www.interactivebrokers.com


* Some of these "ECNs" may not be true ECNs, and you may be going through a dealing desk. It is impossible to verify for sure because of the lack of regulation governing forex brokers.


It is important that you carefully look into the pros and cons of each broker before choosing the one which best suits your needs. You may also wish to have several broker accounts to mitigate the risks, and so that you can compare bid/ask prices and trade on the broker with the best prices for the direction you wish to trade.

Because of the unregulated nature of forex, US brokers are not required to keep your money in an untouchable account that only you can have access to if they were to collapse.


As customers of Refco (was one of the world's largest brokers) found out, their unprotected accounts made them unsecured creditors, and thus are less likely to get their money back than those who had given secured loans to Refco. What this means is that the customers' money was used to pay other creditors.

The moral of the story is this:

Deposit as little money with your broker as you need for trading, and withdraw your profits when they exceed a certain amount. Keep the rest of your trading capital in your own bank accounts which are probably government-insured.

Forex trading broker

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