When you are totally new in the forex market, it may be hard to get your head around all of the different account types that are available to you as an individual trader.
Don’t worry, you’re not alone! Many traders start with a Standard Account and then realize they want to have more control over their trades and switch to an ECN Account later on down the line.
In this article, we’ll explore exactly the difference between a Standard account vs ECN account.
Forex Standard Account vs ECN Account
There are two types of online trading accounts: Standard and ECN. An account type basically dictates how orders flow through a brokerage. Each type of account is important for different reasons, so it’s good to know what makes each one unique.
In a standard account, orders are routed to market makers who post quotes (prices at which they’re willing to buy or sell). When you buy or sell, your order gets filled by whichever market maker can execute your trade at that price.
In an ECN account, however, orders go straight to other customers and market makers don’t get involved in trades.
Also Read: RoboForex Account Types
1) What is Standard Account in Forex?
Standard accounts are accounts that do not have an Electronic Communication Network (ECN) available to them.
This means that you can only place limited orders on your trades. In essence, your broker may fill your order in such a way that there is some level of slippage.
There is no slippage but the spreads may be higher because the trader’s order is passed to another liquidity provider.
2) What is ECN Account in Forex?
An ECN (electronic communication network) account is an electronic version of a standard account; it has similar features and functionality. However, unlike a standard account, an ECN uses a third-party matching engine that matches orders in real-time.
This means that when you place an order to buy or sell currencies with your broker, multiple parties will be able to fill your request at once instead of being queued by the broker’s own inventory.
As a result, you can get more favorable prices for your trades compared to traditional trading models. Note: Trading with an ECN broker doesn’t necessarily guarantee better pricing for you as a trader but there is no problem of spreads. You will have to pay a certain commission.
3) Leverage/Liquidity
If you’re looking to trade a lot of different stocks or options regularly, an ECN account is probably your best bet. An ECN account gives you access to these exchanges without having to deal with brokers and their spreads.
It also means faster trading, because when you place an order, it travels straight from your computer to other traders in what’s called lit pools. Unfortunately, not all brokerages offer ECN accounts and they can be more expensive than standard accounts.
4) Trading Platform/Tools
There are certain advantages and disadvantages of each account. While a standard account requires less work in terms of trading, it has higher spreads, which can eat into your profits if you’re not careful.
If you’re a heavy trader who is looking to increase volume, an ECN account could be ideal for you. But if price matters more than speed, stick with a standard account.
Related Reading: Exness Account Types
Conclusion
Which is Better for You? It depends. An ECN account has several advantages over a standard brokerage account, but it can also have drawbacks that are not immediately obvious to a beginner trader.
In order to choose what kind of trading account is best for you, here are some questions you will need to ask yourself: Is your main concern getting in and out of trades as quickly as possible?
If so, an ECN account will be better suited to your needs than a standard brokerage account. But if you care about the correct pricing and slippage problems, you can choose a standard account.
I hope after reading the Standard account vs ECN account article, you will be able to choose the right forex account types for you.
