Market-Makers vs ECNs

As you know, the currency market (Forex / FX) is an unregulated market is not traded on exchanges, which means that the price you see and get a dealer may vary from those of other riders . There are mainly two types of runners. One type is the ECN (Electronic Communications Network) and other market-maker.

Market makers "make" or set prices on their systems based on what they think is best for themselves as compensation. This is because every time you sell, you should buy, and when you buy, have to sell. That is why we can offer fixed spreads, as it is setting the supply and demand prices. Many of them, then it is to "protect" or "cover" in order to transmit it to others, however, some may decide to take your order, and thus trade against them. This can lead to a conflict of interest between the retailer (you) and market makers.

NEC, however, delivered prices of some banks and market makers and other traders in the ECN, and display the best bid / offer on the basis of this input. That's why sometimes you can get no spread in the NEC, especially in a highly liquid currency pair. How to make money ECN? They still charge you a commission for each transaction.

Here are some pros and cons of ECNs and market makers:

Market makers

Advantages:

• Usually provide free graphics software and news service
• The price may "soften" and less volatile than ECN prices (this can be a disadvantage if the resale or trading very short)
• Often has an interface more user friendly trading and analysis

Disadvantages:

• They may trade against them. In this case, there will be a conflict of interest between you and them
• The bid price may be worse than what could be in REC
• It is possible that can trigger stops or not let your trade reaches its target level of profits by manipulating prices
• During the stories, there will usually be a large amount of slip, the system can also lock or impossible to put in hours of high volatility
• Many of them to prevent damage and to resellers in "manual execution", which means that orders can not be met in the price you want

ECN

    Advantages:

• Generally, you can get a better supply / demand, because they come from various sources
• The differential between supply and demand can not spread or spread small, sometimes
• If they are true ECN, they will not work against you, but you deliver your order to a bank or other clients at the end of the transaction.
• You will be able to offer a price between supply and demand with the possibility of filling
• If they support Stop-Limit Order, may prevent it from slipping during the news, to ensure that your order will be executed at the price you want or not at all
• The price may be more volatile than it would be better for scalping

Disadvantages:

• Many do not offer integrated graphics
• Many did not offer new integrated
• Many of the trading platform is less easy to use
• Variables because of differences (between supply and demand), may be more difficult to calculate stop loss and profit target in pips in advance.

Summary

It is important that you observe carefully the pros and cons of each broker before choosing the one that best suits your needs. You can also have a number of brokerage accounts to reduce risk, and so you can compare supply / demand and trade in the hallway the best price for the direction you want to trade. Due to the unregulated nature of forex, U.S. officials are not required to keep your money in an intangible asset that you can access if they collapsed. As customers of Refco (was one of the largest brokers in the world) found that reporting unprotected unsecured creditors, and therefore tend to get their money than those who had obtained loans to Refco. What this means is that customers' money to pay other creditors.

Moral of this story:

Less money deposit with your broker that you need to trade and take profits when they exceed a certain amount. Keep the rest of your trading capital in your own bank account can be provided by the government.