ECN Vs. STP – The Differences Explained in Simple Words

The Forex market is the largest and most liquid market in the world with an average daily trading volume of $5 trillion. It can be traded on a variety of platforms, from ECN to STP brokers. Different types of Forex brokers offer different types of services and features. ECN brokers provide traders with lower spreads, but they also charge higher commissions than STP brokers. STP brokers offer a more stable platform, but they also have higher spreads that are not as competitive as ECN brokers. Here we discuss the major differences between both these types of Forex Brokers. Visit MultiBank Group.

ECN Or Electronic Communications Network 

Electronic Communications Network is the broker in Forex trading that routes your order through the central interbank market. Also, they help to fight your orders at the best market rate without any intervention from dealers.

 The bank through which you fill your order has no idea about your identity. They do not even have the knowledge of where you have placed your stop order. Therefore, the Electronic Communications Network brokers only provide the routing service for your trading models.  

An ECN Broker is Ideal in Situations Like

·         You want a high speed of execution for your trading strategy 

·         You require the lowest bid-ask rate 

·         You want the security of a flat commission rate 

·         Your trading strategy requires Flexibility of hours both inside and outside. It is possible for ECN brokers because they participate in central market exchange. 

STP Or Straight Through Processing- 

Straight-through processing is a technology used by a broker to directly deal with the market. It can electronically pass the trade directed to the market without any delay. They send your trade directly to a second party that might be another STP broker or an ECN broker.

Therefore, you can understand that both this strategy has two different dealing routes. In STP there is no dealing desk rather the trades are going directly to the interbank market. 

An STP Broker is Ideal in Situations Like

·         You want no Commission rates 

·         You are content with low spreads on your trades 

·         You want to deal in Forex real-time trading 

·         you want to have direct access to the interbank market 

Differences Between STP And ECN Brokerage Systems

There are many differences between these two types of brokerage systems.  

·         ECN brokers are usually more transparent than STP brokers.  

·         ECN brokers demand a commission on the trades whereas, STP brokers can charge a commission and profit from the spreads.  

·         ECN brokers offer variable spreads, but STP brokers can offer both variables and fixed spreads.  

·         ECN brokers only follow the order route straight through the central interbank market. But STP brokers pass is your order to a second party. The second party can be an ECN broker or another STP broker. The order routes are completely different in these two brokerage systems. A specific order might travel in different routes because of the change of the broker. Order routes can heavily impact the result and the profit margin you will enjoy. Therefore, choosing the right broker partner could your trading business is highly essential. 

·         An ECN broker waits for the potential investors on ECN. Because of this operational delay, this type of brokerage system inserts in lower cost and higher dealing time. On the other hand, STP brokers operate in a direct route. Thus, many times their operational time or trading time is lesser than ECN brokers. However, the exact time of trading depends on the exact route it takes during a deal. 

·         ECN brokers charge a small commission on the trades which is pretty affordable. But STP Brokers will charge commission and gain profit from the spreads. It can offer both fixed and variable spreads.  Know more أفضل وسيط لمنصة العملات الأجنبية لتداول المشتقات المالية في عام 2022 | مجموعة ملتي بانك.

Summing Up 

Every trader has their own trading style and strategy. After reading the entire article you perhaps have decided on how to pick your perfect broker. But if you cannot decide which broker to choose, we suggest you work with both ECN and STP. Know more ميتاتريدر 5

You can open a demo account and try trading with both ECN and STP Forex brokers. Then you will be able to decide which one suits your trading style the best. However, regardless of the choice, you should always go for a regulated broker.

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