Global GT and FXGT have an ECN account, and other accounts are STP type. But what is ECN in the first place? There will be a lot of people who have a question to say. This article explains the differences and characteristics of STP and ECN accounts.
What is an ECN account?
ECN stands for “Electronic Communications Network”. An ECN account is an ordering method that allows you to trade directly without any broker intervention. In the ECN method, investors can trade directly with each other, so it boasts high contract power. Individual investors are prohibited from directly accessing interbanks where orders from investors and major financial institutions are gathered. However, with the ECN method, FX trading is possible under the same conditions as trading directly with an interbank.
high transparency
ECN trading is a highly transparent trading method. This allows FX trading under the same conditions as trading directly with an interbank, so there is no risk of intervention by a third party.
narrow spreads
A contract is executed when the price at which traders want to buy and the price at which they want to sell match, so there is a tendency for spreads to occur less often. As a result, spreads tend to be narrower than STP, and fees are incurred instead.
Board information
ECN is so transparent that you can see the depth of market information. You can see the market movement well because you can monitor the flow such as the number of orders.
What is an STP account?
STP is an abbreviation for “Straight Through Processing”. The mechanism is intervened by the FX broker, and the spread is added to the rate and presented to the trader. In other words, it lacks transparency because it is the opposite style of ECN.
high leverage
In the case of the STP method, traders’ high leverage trading can also be covered. Therefore, you can trade with ridiculously high leverage. The reason for this is that STP trading is applied.
low transparency
Less transparent than ECN. This is intervening in the case of STP, so traders don’t know what’s going on. , STP trades are executed at the rate presented by the covered party, so the transparency is inevitably lower than ECN.
wide spread
The biggest disadvantage of STP is the wide spread. The STP method only sends the rate of the covered destination to the trader, but this action also costs money. STP is not suitable at all for scalping trades.
Comparison of STP and ECN
So what happens when you compare the two with the above points in mind? It will look like this:
| STP | ECN | |
| Spread | wide | narrow |
| transaction fee | No | Yes |
| contract power | usually | High |
| Board information | Not see | can see |
| Indicative price | Not see | can see |
| Transaction transparency | high | high |
| refusal of contract | None | None |
scalping trade
STP is quite unsuitable for scalping trades that aim for a momentary price range. This is because the spread is extremely wide. If it is not ECN, please think that you cannot compete in scalping trades.
leverage
If you want to trade with high leverage, it will definitely be the STP method. The reason is explained above. In most cases, ECN has lower leverage than STP.
transaction fee
Transaction fees will occur if you have an ECN account. In an ECN account, the spread is the price difference between the trader’s and the interbank’s order. Therefore, ECN accounts do not add the broker’s share to the spread.
Bonus
ECN accounts often do not receive bonuses. Both account opening bonuses and deposit bonuses are available for STP accounts, but neither are available for ECN accounts.
refusal of contract
Execution refusal tends not to occur even with STP, but ECN accounts are structured so that execution speed is fast and there is no refusal of execution. The reason for this is that electronic trading directly and automatically places the orders of the seller and the buyer.
Board information
In STP format, you cannot see any depth information. You can see the board information on the ECN account. Therefore, the amount of information on ECN accounts is overwhelming. Being able to trade while looking at the price and order volume will lead to profits. ECN accounts can sense real-time trading flow.
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