Stepping into the forex market as a trader surely opens many opportunities for everyone with an actionable trading plan and the right amount of knowledge and skills to follow the plan without fail. Along with that, the functionality of your trading platform and the trading conditions offered by your chosen broker are equally important for a smooth trading process. This will also impact the end results of trading. ECN Forex brokers have become popular in the trading community due to their cost-effectiveness and seamless execution.
In this article, I will walk you through some simple steps to easily find the best ECN Broker to trade and ensure a superior trading experience.
1. Check the Reputation and Regulation of the Broker
When it comes to ECN forex brokers, you get quite a lot of options to choose from, but making a wise choice is important to ensure the safety of your funds. You need to make sure that the broker you choose is reliable; for that, you need to check their reputation in the market. Regulations can be taken as a valid licence for a forex broker, and a broker being regulated by a top-tier authority surely makes them trustable for trading.
The regulatory body will monitor all their operations and activities as the broker is expected to operate within the guidelines and standards set by the regulators. ECN brokers, who are regulated by top authorities like FCA, CySEC, ASIC, etc, are trusted choices for traders on a global level. You can also check the reviews and feedback of clients to check the quality of the broker’s services.
2. Calculate the Trading Cost Based on Their Pricing
The next step for choosing the best broker for yourself is calculating the trading costs you must pay while trading with them. For this, you can check their pricing in terms of spreads, commission, swap fees and other charges. Spread is the price difference through which a broker earns between buying and selling activities. The difference in bid and ask prices is their main source of revenue, and it is what we refer to as spreads.
ECN brokers tend to have the lowest spreads in the market, but you still need to ensure that you will be getting tight spreads before signing up with the broker. Spreads are mostly stated in pips, and it is like a markup on the exchange rate. If you are confused about conversion rates, you can use a currency calculator to better understand them. This tool converts one currency into another by applying real-time exchange rates.
In the case of commission, it is another fee charged for the execution of trades as the broker functions as a connecting link that lets you access the live market and place trades at the best possible prices. The commission will be either stated as round-turn charges for the entire trade or as the commission charged per side per standard lot, which is the standard lot size in Forex. Swap charges are applied to overnight positions held by the trader, and they change based on the currency pair chosen and their interest rate difference along with the type of position opened.
The swap charges do not result in an expense for traders in every situation because the broker will be the one paying the swap charges in certain trade scenarios, and traders will be at the receiving end. That is why there are strategies like carry trading, where traders make profits out of swaps that they earn while keeping their positions open for an extended period of time. In addition, you should also check other charges like processing fees, inactivity fees or platform fees.
3. Test the Functionality of Their Trading Platform
The next step is crucial in the broker selection process as the entire trading experience you get with a broker depends on their technology, and it can be assessed by testing the functionality of the trading platform they provide. The best way to test the working of a trading platform or software is by trading yourself on a demo account. It removes the risk of losing real money, and you still get to access all the features and tools offered by the broker, giving you a glimpse of the actual trading process in real-time market conditions.
Most forex traders are still fond of the classic MT4 platform due to its user-friendliness and powerful features. MetaTrader 4 was one of the first software programs specially designed to cater to the needs of forex traders. It also supports trading other asset classes, but the priority is currency trading. Modern traders are also exploring the MT5 platform, which is the advanced successor of MT4. So, make sure your broker supports trading on your preferred platform before signing up.
4. Check the Speed of Execution
In order to get the desired trading results, your orders must be placed and executed at the right time and right price without any delay. The forex market is famous for being fast-paced, and you may miss out on a good trading opportunity in a fraction of a second. Hence, you can’t afford to lose money due to delayed execution, resulting in order cancellation, price requotes, or slippage in many cases. The speed of order execution is crucial for a trader, and a broker with frequent delays in execution is a turnoff for all of us.
ECN brokers are always known for fast execution of orders because they use Electronic Communication Networks as their execution mode. Still, you need to confirm the same before making a decision. Hence, you must be checking the average order execution speed promised by your broker to ensure low latency. This way, you can ensure a seamless trading experience, which is essential to getting the desired trading results.
5. Look at Their Liquidity Providers
Providing enough liquidity to enter and exit trades with ease is one of the primary functions of a forex broker. Retail traders don't get direct access to the market unless they sign up with a broker, letting them connect to the market and place trades at the best prices. For this, the broker partners with top-tier liquidity providers, which are reputed financial institutions. ECN brokers always team up with multiple liquidity providers, allowing them to offer a tight spread and hassle-free trading experience with high-speed execution.
6. Compare the Account Types Offered
Most of the top-tier brokers offer different types of accounts to meet the needs and requirements of different types of traders, making their platform more inclusive for all. You can see brokers offering raw spread accounts along with commission-free accounts where they will be charging a markup on spreads to compensate for the loss on commission. Some brokers also offer zero-spread accounts where all the cost will be added to the commission instead.
Another popular account type added by brokers is the Islamic trading account, a swap-free account designed for Muslim traders who cannot engage in transactions involving any form of interest since a swap is based on the interest rate differences between 2 currencies in a pair. So, while choosing your broker, you need to check and compare the features of the account types they offer to choose the best one for yourself.
7. Evaluate their Customer Support
Customer support is crucial for getting the best experience with any kind of service, and it also applies to forex trading. You need to make sure the broker has all means of communication with clients so that you can reach out to them as and when needed. They should have fully functional customer support systems like live chat, email, and communication via phone so that you have multiple methods to connect with them to clear any doubts or resolve your issues.
Responsive customer support can actually save you from a lot of trouble that you will go through if there is no proper person to rely on during an emergency. Sometimes, the broker may have systems like a chatbot, but I always prefer talking to a real person. Choose a broker with an active customer support team working around the clock.
8. Check What Other Programs They Have
Lastly, check what other programs and trading services the broker offers if you are interested in them. For instance, many brokers provide educational programs or resources to welcome beginners to their platform. Besides this, you may also get earning opportunities outside trading via partner programs like introducing brokers, referrals, and affiliate programs. So, you can see what your broker has in store and can also look for brokers providing such programs in case you wish to make some passive income.
So, these are the simple steps that you need to follow to choose a suitable broker for trading. One last tip I can give you is to try different broker platforms on a demo account to understand how they differ, and then choose a broker that can meet your requirements for trading.