The Essence of Forex Trading
The idea of Forex is in the name itself, which stands for Foreign Exchange, otherwise known as currency exchange.
Forex is the world’s biggest currency market, with billions of dollars exchanging hands daily. Central and commercial banks, transnational corporations, large investment firms, funds and private investors alike are all involved in this lucrative trading activity. With so much money up for grabs every day, it’s no surprise that Forex offers immense potential to its traders!
To put it simply, the essence of forex is to engage in profiteering on the price differences of currency pairs. One may earn here as the currency rate increases, so as it decreases. The annual income can easily exceed the number of bank deposits and investments in traditional stock exchange instruments by a dozen percent, provided that the trader has a well-thought-out approach to forex. However, it is worth considering that trading is a high-risk activity.
The majority of newcomers to trading dream of getting rich in a matter of just a few days. Yet the reality shows that the path to becoming a prosperous forex trader involves hard work, patience, and practice. Here are some tips for beginners in the forex market:
- Learn the basics of currency trading;
- Practice on a demo account if you have no experience;
- Determine the course of action in advance;
- Be disciplined in your actions;
- Read useful things;
- Stay cool and calm.
The foreign exchange market, as well as the stock market, will always be filled with customers who want to sell currencies at a particular price. Likewise, there are plenty of buyers who do not mind buying it. These two categories of traders place their orders, which form a global ECN system. When the bid and offer prices match, the transaction is successfully completed and both parties are satisfied.
What is an ECN Account?
An electronic communication network (ECN) is an electronic trading system, designed to reduce the number of intermediaries and middlemen, such as exchanges and the like, between a broker and a trader.
Apart from the standard brokers’ rating, there is an ECN broker list, which includes the best brokers, implementing ECN. Such accounts are an innovative way of trading that meets the needs of both parties and promotes their mutual benefit.
A regular trading account involves the broker selecting the other side of the trade based on the orders available to him. With ECN this whole process is fully automated, and the second party to the deal is selected from the entire database with the most suitable conditions.
On a liquid market, ECN possesses undeniable advantages: the execution speed increases and trading conditions are improved. The company providing such a system is interested in receiving a fee per trade or for the time of use of such service.
How working with ECN Accounts can be better than conventional ones
- There is no need to possess large sums of money to start working with ECN accounts;
- ECN Brokers provide clients with analytical and informational support, as well as offer pre-configured forex trading platforms;
- ECN systems connect clients from all over the world, which increases the total trade turnover and allows 24-hour trading;
- Transparency of operations is guaranteed;
- ECN company makes a profit solely from commission payments from clients’ transactions and is not interested in traders losing their deposits;
The key advantage of ECN accounts is the fact that traders’ positions are directly channeled to liquidity providers and the broker does not intervene in the process in any way. Such a trading account type has appeared recently, but lately, more and more broker companies and traders try to include it in the list of their instruments.