If they want to establish a good reputation among their clients and on the market, Forex brokers have to offer a trading platform with all necessary features that will meet clients’ needs. The MT4 has lived up to the high standards and is the dearest of all platforms. The MT4 has initially been just for dealing desks, but that is not the case anymore. Since retail brokers are suitable for small traders, rather than big investors, the market had to offer more than just dealing desks. The perfect solution was the ECN network which has created better market conditions for traders. The ECN has a lot of advantages and is often called the broker on the trader’s side. This review focuses on the link between the winning MT4 platform and the neutral broker ECN and how they have been integrated to work as one entity.First, let us analyze the difference between the ECN and dealing desk brokers.
ECN vs. Dealing Desk Trading
While dealing desk trades are carried out over your retail broker who dictates the market conditions and currency prices for you, the ECN network represents the intermediary between traders, retail traders, and liquidity providers. ECN stands for the Electronic Communication Network (ECN) and is the online-based system that links you to the market. The ECN is more objective given that there is no liability or conflict of interest between the traders and the intermediary, unlike traders registered with retail brokers, where there is a direct conflict of interest between the two parties. Namely, retail brokers make money from their clients which means that they prefer traders to lose in order to keep their profits lucrative. The dealing desk broker is the direct liquidity provider, and hence they cannot cheer for their customers to win. The ECN network does the opposite. It does not interfere in the relationship between the liquidity provider and the trader. ECN broker’s profit does not depend on the loss or profit of the trader. There is no dealing desk in these trading circumstances. The liquidity provider is mostly an independent third party (banks). The ECN offers better and more competitive spreads which depend on the number of liquidity providers. The ECN broker provides the best quotes after which they direct their traders to the liquidity provider. The ECN broker makes a profit regardless of trader’s success. If the trader wins, the ECN broker collects money from the liquidity provider, and if the trader loses, they cover the losses with the trader’s money. They stay clean either way.
The Perfect Combination of MT4 and ECN
The MT4 is without any doubt the winning platform in the Forex business. First, it was intended as a dealing desk platform with no intention to evolve to an ECN provider, but brokers applied some modifications to adjust the platform for ECN trading. Forex brokers created a so-called bridge between the MT4 and an actual ECN platform. After the connection was set, traders could enjoy ECN trading deals from their favorite platform. It would have been a real shame if the MT4 had stayed available just for dealing desk trading. Luckily, the first – class platform found its way into the ECN network as well.
Currenex and MT4
Currenex is one of the favorite ECN platforms which has been designed for ECN trading. The Currenex bridge helps MT4 brokers to stream prices to their client base and to enable access to Currenex liquidity pools, fast order execution, one-click trading, etc. The Currenex MT4 Bridge is one of the most sophisticated integration methods and directly connects to the Currenex hub which means that third party servers will be successfully avoided. The Currenex/MT4 integration has the following advantages:
– Direct market access to the to all liquidity pools
– Fast execution
– No requotes or trading restrictions
– Neutral broker
– Straight through processing to ECN
– The lowest spreads
– Low or no commissions
– Supports scalping
– Minimum execution waiting time and superior liquidity
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No Conflict of Interest
Retail brokers and ECN brokers differ in the no conflict of interest policy. Given that traders trade against their retail brokers and that their loss is their broker’s gain, conflict of interest is inevitable. Moreover, retail brokers cannot take the pressure of large investors who make steady profits since they lack the level of liquidity required to be able to pay out large amounts of money on a regular basis. They are more suitable for small volume traders who make occasional profits. An ECN broker is neutral in all aspects. They provide a neutral trading field for traders who trade against a third party. ECN brokers try to have as many liquidity providers as possible in order to offer the best quotes in the market.
What is in it for ECN Brokers?
ECN brokers usually take their share in one of the two standard forms. Some ECN brokers add one or two additional pips to the actual market spread in order to widen the difference between two currency values. The additional spread goes to the ECN broker. For example, if you lose a trade, you have to cover the entire spread; the actual and the additional. If you win, the liquidity provider pays your share to you and the additional spread to the ECN broker. Some ECN brokers do not add pips to the market spread but choose to charge a commission for their services. Traders pay a small fixed fee, and in return get the best quotes and conditions. It seems that the ECN broker is always one step ahead by making profit regardless of the outcome. In addition, traders are also in a better position and can benefit from the neutral broker.
Meta Trader 4 is the widest known platform, and Forex trading would be unimaginable without this superior technological tool. On the other hand, ECN brokers provide the most competitive spreads in the market and other benefits, creating almost the perfect conditions for traders. A combination of the best platform and the best conditions in the market has been one of the smartest moves in the business for all parties included. Now, traders can use their favorite platform and avoid dealing desks and retail brokers.