ECN stands for Electronic Communication Network. ECN forex accounts have lots of advantages for forex traders and it is how I usually trade. Comparing it to standard forex accounts, ECN lets you trade directly with the liquidity provider. So it removes the risk of broker manipulation.
This type of brokers allows you access to the global liquidity pool which are compromised by regulated financial institutions. Your orders are automatically matched and executed at the best price available and the fasted execution time.
Since the broker earns commission fees on every transaction, the more you trade more they profit. Therefore this trading model encourages ECN brokers not to trade against clients or manipulate the trading conditions contrary to the brokers which are B-booking clients.
Get Direct Access to the Source With ECN Forex Account
In order to make it easier to understand, think of a supermarket and farmer allegory. The farmer provides supermarket with food. You can’t access to the farmer due to either you don’t have the necessary means or you don’t know the address to the farm.
The supermarket has to mark up the price that it pays to the farmer in order to profit. Perhaps sometimes excessively because it has a monopoly around your neighborhood. Imagine that this particular supermarket promises you that it is going to reveal you the address of farmer but with a commission on every product you are going to purchase from the farmer. This latter supermarket could be thought of as an ECN broker.
Spreads are very low because you are dealing directly with the main guy without any middleman. Execution is instant due to absence of market maker interference and any trading strategy is allowed. All those make ECN brokers ideal for forex trading, especially for traders whose trading style is based on scalping and expert advisors. ECN has been the way for me for long time.