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by: praheeban_np
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Date: Sat, 24 Apr 2010 Time: 10:40 AM
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ECN brokers are said to be more honored because they are into a better regulated system and hence are better received than the other brokers who offer a fixed spread. ECN operators bring before you a spread that is more flexible and hence the possibilities of profitable outcome are much higher. You need to bear in mind that if you go with a middleman who offers a fixed spread, then that will turn out to be an unwise decision that you will regret later. ECN is a very commonly used abbreviation in the forex trading parlors. This means ‘electronic communication network’. Although the expression is common, the phenomenon is not very common. Brokers who form part of this network are called ECN brokers. Not all brokers take part in the ECN system in view of highly volatile buying and selling rates in a fluctuating market.

The most important difference between an ECN broker and a regular trading middleman is that while the ECN broker processes the orders through inter-bank system, the regular trader does his trading against his clients. Another difference is that an ECN broker acts as a middleman, unlike the regular trader who is actually at one end of the transaction.

When you are working through an ECN broker, the true dimensions of the market become easy to be understood. It will also help you to clearly know the demand-supply situation in the market. The system readily gives you the status of the quantum of sold and bought orders at stipulated price thresholds. The names of the parties involved in transactions in this system remain anonymous. This is a very comforting feature of trading through ECN system.

To describe the ECN system broadly, it is a process where different channels of transactions are directed into an inter-bank trading system. Normally, one will have to put in 5000 US Dollars and onwards in order to open an ECN account. Taking into account all the benefits that you will derive from trading through the ECN channels, the money that you put in is well worth every dollar.

Most of the time, the money transfers in the transactions are done through credit cards. In order to ensure secure transactions, the ECN system does not allow fund transfers through bank, wire or any other mode. This is how the ECN brokers process order transfers in an inter-bank trading arrangement.

Pratheeban is doing research on forex trading, specially about forex brokers as well as he writes more forex broker reviews too.