RETAIL e-FX CLIENT
network provided by the ECN, rather than trading directly with them, the ECN’s sole purpose is to match up orders with the opposite side as quickly as possible. And since you are dealing with a number of large liquidity providers rather than a single counterparty, execution is greatly enhanced. Traders can take advantage of being able to see several of the best quotes being offered at a certain point in time in a currency pair by market participants, giving them a better sense of liquidity and market depth.”
Mariusz Potaczała
“One of the advantages of dealing desk execution is that a large order does not always need to be executed at the market. A good dealer, who knows the client’s investment style, is frequently able to work an order to achieve a much better execution result.”
process each order. Dealing desks struggle with more aggressive scalping strategies where clients are trading very tight ranges in order to make just a couple of pips on each trade.”
Callan points out that “Te nature of the non- dealing desk model enables the broker to accept all types of trading, including scalping, allowing them to accommodate clients’ needs even as their trading strategies evolve. ECNs are particularly suited to event or news trading strategies. With access to a network of many institutional liquidity providers, you can still get your order successfully filled even during the most volatile situations. ECNs never restrict trading during news events, and the price you see is the price you get. Tis is vital for event and news trading, where success can depend on you being able to create specific entry and exit points at the price you want because of the volatility associated with this type of trading.”
Faster trade execution
Faster trade execution is also a major benefit of using an ECN, says Callan. “As you are simply using the
164 | april 2012 e-FOREX
Traders can also exploit increased price volatility when using an ECN, says Callan. “Prices are not constant when trading on an ECN, and as such, traders can experience several large price swings in a short time, especially during volatile trading periods. If you are a short-term trader, you can turn this price volatility to your advantage and claim quick and large profits. Traders looking to take advantage of this should buy a large number of currency pairs and hold on to them for just a short period of time in an attempt to make a small but quick profit on each trade. Tese types of gains are possible because of the large depth of liquidity an ECN provides. Rather than waiting and watching as a spread changes and shifts, traders are able to stay in or get out of the market when they choose. Even though this may only be a few seconds, those few seconds could be the difference between a several pip gain and a several pip loss.”
Choice of broker
Te type of ECN broker that you use can significantly impact your trading performance, says Callan. “If a broker does not execute your trades in a timely fashion at the price you want, what could have been a good trading opportunity can quickly turn into an unexpected loss; therefore, it is important that you carefully weigh the pros and cons of each broker before deciding which one to trade through.” Consequently the brokers offering ECNs have gone to great lengths to add new features to make their platforms more user-friendly and competitive adding flexible web-based trading capability, lower minimum trade sizes per point, new user interfaces and enhanced algorithmic strategies. A number of ECN brokers are also offering trading support and educational services to help retail traders be more adept at managing orders. FXCM has a research arm called DailyFX with a team of analysts publishing daily articles, divulging trading tips and running on-demand video lessons.
Cyprus-based FXPro is another leading broker that offers both dealing and non-dealing desk execution.
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