ECN Forex Trading FAQ


ECN means Electronic Communication Network and refers to the Electronic Network of Banks. This network is designed to match automatically bid and ask orders and to execute transactions without any intervention. Via the use of the ECN network participants in different geographic locations can easily trade with each other without the need for a middleman.

□ STP order processing (Straight Through Processing) also refers to an order processing model that doesn’t involve manual intervention. Most of Forex brokers apply the STP model to handle their clients' orders.

□ The daily volume traded in the global Forex market is close to $5 trillion (50x the daily volume of the New York Stock Exchange)

□ About 85% of all Foreign exchange transactions involve the Forex majors and about 90% of them are speculative


1. What is an ECN Forex Broker?


ECN Forex Brokers are large financial firms that can connect traders with the ECN Network via the FIX Protocol (Financial Information Exchange Protocol). ECN brokers create a liquidity bridge between retail traders and the vast market depth of the International Foreign Exchange Marketplace, and they do that without interference.

  • ECN brokers offer floating spreads, by only charging trading commissions
  • ECN brokers traditionally offer faster order execution than other types of brokers

» Find and Compare Forex Brokers


2. What are Liquidity Providers?


Liquidity providers refer to large institutions that offer liquidity to the Foreign Exchange market and include banks, hedge funds, and other large financial entities that cooperate with Forex brokers in order to place orders into the ECN server. In this way, Forex brokers are able to offer currency quotes to their retail clients.

The difference between Tier-1 and Tier-2 liquidity:

□ Tier-1 liquidity providers include vast banks such as Goldman Sachs, J.P. Morgan, Morgan Stanley, Nomura, Bank of America, Citi Bank, and Barclays. In the Foreign Exchange market, the most important liquidity providers are Deutsche Bank, UBS, and Barclays Capital.

□ Tier-2 liquidity providers act as intermediaries between brokers and Tier-1 liquidity providers

  • More than 90% of Forex brokers do not have access to the liquidity of Tier-1 (Tier-1 providers require very large trading volumes)
  • Smaller providers of liquidity (Tier-2) include Currenex, LMAX, and Integral

□ Liquidity providers also include some exchanges trading Forex derivatives such as the CME Group, CBOE, the London International Financial Futures Exchange, and ICE (Intercontinental Exchange).


ECN Forex Trading FAQ


3. What means Trading on Margin?


Margin means an amount used as collateral for opening any trading position in the Forex market. Trading on margin means opening positions larger than the initial trader’s funds. This feature is called trading leverage. Usually, ECN Forex brokers allow trading leverage up to 100:1, and that means trading 1 million dollars with an account of a few thousand dollars. If a broker offers leverage 100:1, by dividing 1 by 100, the min. the margin requirement is 1% of the aggregate trading position size. Note, that in the European Union, the maximum allowed trading leverage for retail trading is limited to 30:1.

  • Used Margin — the amount of money in the trader's account that is already used to maintain positions open



4. What is the Rollover?


Every day at midnight all trading positions are either debited or credited an amount called Rollover or SWAP rate. This amount reflects the differential between the interest rates of the two Forex currencies. For example, if you have bought a Forex currency with a 5% annual interest rate and at the same time selling a Forex Currency with a 1% annual interest rate then your account will gain a daily Rollover rate. Note that this rate is credited every day at midnight except on weekends. On Wednesdays the Rollover value becomes triple

  • No Rollover on Weekends
  • Triple (x3) Rollover on Wednesdays


5. What do Bid/Ask and Trading Spread mean?


Every Forex pair is traded with two prices, bid and ask. Ask is the lowest price to buy a Forex pair and Bid is the highest price to sell it. The spread is the difference between these two prices. ECN Forex brokers offer tight spreads and that means a narrow difference between Ask and Bid. For example, EURUSD is offered usually at about 1 pip spread, GBPUSD at about 1.4 pip, and USDJPY at 1.3 pip.

□ If Ask: 1.0002 and Bid: 1.0000 | Spread is 2.0 pips


6. Which are the Forex Market Sessions?


The Foreign Exchange market is open 24/5, from Monday to Friday. Here is a table with all sessions based on the GMT zone:

Forex Market Center

Time Zone




Europe / Berlin

07:00 AM

03:00 PM


Europe / London

08:00 AM

04:00 PM

New York

America / New York

01:00 PM

09:00 PM


Australia / Sydney

09:00 PM

05:00 AM


Asia / Tokyo

11:00 PM

07:00 AM


7. Do ECN Forex Brokers provide Demo Accounts?


Yes, ECN Forex brokers provide Demo/Practice Accounts. A demo trading account is a good start for any Forex trader, before opening a Live Trading Account. Although there might be differences in the trading conditions of a Real and a Demo Account, in general, a Demo Account can prove a good pilot to determine what is going on. Even if you already have a Real account, a demo with the same broker can be a good tool for testing spreads and the risk exposure of any position. That means opening the same position on a Demo Account before opening it on a real account.


8. Which Fund Methods are Available by ECN Forex Brokers?


ECN Forex brokers support a wide variety of funding methods. They all support Bank Wire transfers, and most of them support Debit/Credit Cards. Some ECN Brokers also support Paypal, Skrill, WebMoney, Neteller, and other internet wallets.


9. What are the Fees charged by ECN Forex Brokers?


Four types of fees may be charged by ECN Forex Brokers:

  • Trading Commissions on Volume (from 0 to $15/lot)
  • Withdrawal Fees (from $0 to $30 per withdrawal)
  • Maintenance / Inactive Fees (from $0 to $30 annually)
  • Fees for Special Services (for example fees for VPS Forex Hosting, from $0 to $50 monthly)



10. What are the essential features of an ECN Forex Broker?


Here are some essential features when choosing Forex Brokers:

  • Safety of Funds

First of all, you should always choose among regulated Forex Companies. Whatever a broker promises, consider it useless, if this broker is not regulated by a reliable government body (for example FCA UK, ASIC, FINMA, etc.). Furthermore, the years of existence in the market and the location (country) of the headquarters are also important. Avoid new brokers and brokers situated in offshore countries. Moreover, a good ECN broker should also provide full client funds segregation.

  • Funding Methods

If the funding methods available do not suit you there is no point in reviewing further any Forex Broker. Just make sure that the funding methods are the same as the withdrawal methods. Furthermore, ask about any fees using the live chat or email.

  • Trading Cost

The cost of trading is a factor determining your trading success, especially as concerns Day-Traders (Forex Scalpers, etc.) Make sure you have reviewed the spreads and commissions charged on the specific account type you are about to open and not to another account type. Account types may differ significantly as concerns the trading conditions.

  • Available Technology

Technology is always important when trading online. The Metatrader4 platform is a clear standard for the ECN Forex industry. Note, some Forex brokers have developed their platforms and offer MT4 only via software bridge (i.e. Dukascopy). A demo account can assist traders to test the technological efficiency of any Forex broker before opening a Real Account.

  • Trading Promotions

Usually, ECN Forex brokers do not offer Welcome Bonus but instead, they offer Forex Trading Rebates, which are very useful for large-volume traders such as scalpers and institutional traders.

» Compare many ECN Forex Brokers



ECN Forex Trading FAQ (c)

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