“ECN vs DMA vs STP vs NDD” answers from Forex Brokers!


Spread is the key indicator of the trading process, reflecting the difference between the best buy prices and the best sell prices of an asset. Therefore, there is a law in the market that states that the narrower the spread, the more liquid a trade asset is. Moreover, ECN brokers are available 24/7 and enable continued trading practices, letting traders fulfill their full-time strategies without significant delays. ECN trading is also unbiased toward traders, as ECN brokers do not trade against their customers, providing fewer risks related to conflict of interest. Best of all, traders can open a free demo account and practice risk-free trading.

  • Electronic Communication Networks (ECNs) play a crucial role in the forex market by connecting buyers and sellers directly.
  • Much will depend upon the quality of the service and the liquidity of markets traded.
  • Unlike brokers who offer commissions built into the spread ECN and STP brokers make money by charging commission per lot, or per 1m or per share (depending on what you trade).
  • Brokers working in the STP system imply an absolutely different approach to fulfilling traders’ market orders.

In any case, this is worth having in mind when calculating a long-term business strategy. No Dealing Desk accounts do not hold positions and will never trade against their clients. ECN accounts are the purest type of No Dealing Desk because they give traders access to the interbank market with the tightest spreads possible. ECN accounts, sometimes called Raw ECN, are much better for scalpers and short-term traders but can also be used by anyone.

⭐ ECN vs NDD

ECN brokers also offer abundant liquidity levels to their customers, having access to large liquidity provider institutions. On the contrary, STP brokers generally do not have access to ample liquidity pools, as they accommodate traders with smaller transactional needs. As a result, their processed transactions might be susceptible to slippage and fail to process orders swiftly. ECN brokers utilize electronic communication networks to create a digital bridge between customers and the Forex trading market.

ecn vs stp

The world of Forex trading can be quite intimidating for beginners, with all its complexities and jargon. One of the most important decisions that a beginner trader has to make is to choose the right Forex broker. There are two types of Forex brokers – ECN (Electronic Communication Network) and STP (Straight Through Processing).

Implementation of the ECN model: a valid alternative, and the price of progress

The ECN Model uses Market Execution, which means that your order will be filled in the interbank market but the execution price may differ from the price you requested upon placing the order. All participants of the ECN have equal rights when it comes to order execution regardless of their capital. Additionally everyone on the ECN can act as both liquidity providers and liquidity receivers.

If you’re making money, you broker is probably hedging your positions as you’ll no doubt have a decent enough account balance to make it cost effective. The advantage of STP/ECN for clean prices is that you get much better pricing because you can work orders inside the bid and offer. However, most DMA brokers will have a minimum commission for traders so if you are a small trader, it won’t be cost-effective.

ECN vs STP Brokers: Which One is Right for Scalping?

The B Book is usually assigned to the FX, Index and Bond markets, where trades are smaller but of higher frequency than the equity market. It would not be cost-effective to only generate income from these customers from spreads and finance charging. Today, brokers working on the Crypto Faucets ECN scheme are becoming more and more popular due to the high speed of order execution. Any action you take upon the information on this website is strictly at your own risk and we will not be liable for any losses and damages in connection with the use of our website content.

In practice, an STP broker may operate on the same program as the trading platform (for example, MT4) and with the same liquidity providers as a regular ECN. ECN brokers typically pay a rebate to market makers depending on the flow of orders, so the more clients the broker has, the lower the commission or spread. In other cases, ECN brokers may first “match” the buyer with the seller and only then conduct the order through banks or other liquidity providers.

Understanding the Differences Between ECN and STP Brokers

That said, emerging businesses that use the ECN model may not always experience sufficient liquidity inflows to support proper order execution. They can benefit from the ECN/STP model, which, in our opinion, is one of the main attributes that distinguish the advanced and versatile broker. An MT4 ECN account is an ECN account offered by a broker which can be traded using the MetaTrader 4 trading platform. Dealing Desk accounts can offer smoother price fluctuations and quicker execution because they fill trades internally. One of the first decisions a new trader needs to make is whether to use a Dealing Desk or No Dealing Desk brokerage account. With an STP broker, the execution speed can vary depending on how the broker routes a trade, which can vary with each trade.

ecn vs stp

When the conflict between brokers and their clients entered a sharp phase, ECN accounts, which excluded the very reason for the conflict, started to gain popularity. ECN brokers were completely transparent and guaranteed every transaction of their clients, but they were still in the minority. If you are losing money it’s because of your forex trading strategy and you probably shouldn’t be spread betting anyway.

What is ECN Trading?

On top of these highly competitive spreads, they will also add their own mark-up which as we have mentioned above, is the main profit source for STP brokers. With STP brokers it is also important to note that they will not be a counterparty to your trade. This means no additional benefit for the broker whether you are winning or losing trades. ECN brokers will tend to add a fixed commission per trade where STP brokers rely on a mark-up spread for their profits. The choice between ECN and STP accounts depends on a trader’s preferences, trading strategy, and financial goals.

ecn vs stp

The same is true for individual Forex brokers and their respective partnerships with liquidity providers. Whereas ECN brokers mostly benefit from a commission on every trade, STP brokers also earn their income through spreads. Therefore, utilizing STP brokers might prove more expensive for traders with high transaction volumes.

This technology allows opening orders at the best prices, increasing profits for the trader. Many experts consider finding the right STP broker the most essential first step to success in online trading. The spreads in the underlying interbank market vary according to market conditions, and ECN brokers pass on the same pricing and spreads to clients.

Another advantage is that trades happen almost instantly – right after the position is open and an ECN trade placed. Not only that, but brokers also cannot trade against their clients, whereas STP brokers can actually benefit from their clients’ losses. These and other advantages make ECN FX brokers quite attractive to many traders. For the true ECN accounts, the broker is offering special conditions and the minimum amount to start is way bigger than the one needed for other accounts.

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