Trading Currencies With The Help Of ECN Brokers

Trading Currencies With The Help Of ECN Brokers
By [http://ezinearticles.com/?expert=Jash_Walker]Jash Walker

Being a Forex trader can be a good source of extra income. The market is open twenty-four hours a day, six days every week, which means your trading activity will not be limited by the opening or closing bell which is the case in stock markets. This allows you to trade currencies while still keeping your regular job.

As opposed to stocks, the foreign exchange market does not have a centralized physical exchange. Currency trading transactions happen over-the-counter between agreeable buyers and sellers from various countries. Years ago, the exchange was only among big banks, organizations and brokers. These entities bought and sold in yards, and this amounts to US $1 billion worth of currency. The exchanges between these entities generate so much volume that the foreign exchange market has become the world's largest financial market. Then again, towards the end of the 20th century, the market opened up to retail traders. These days, individuals of average salaries can be Forex traders because the trading size reduced to a manageable amount. Retail traders now are given the chance to trade micro lots, which allow you to control one thousand US dollars worth of currency. Introducing micro-lots is a massive step down from the billion dollar yards traded years ago. The Forex market is also a very leveraged one, which means you can control a 10,000 USD worth of currency for as low as 50 USD. In this manner, it is possible to ease into the Forex market slowly, and gain experience and confidence without risking a lot of money.

Retail traders cannot enter the interbank market as they do not have credit connections with these entities. Retail traders generally trade through market makers or electronic communications networks, also known as ECNs.

Many claim that ECNs are better due to the fact that unlike market makers there is no intermediary in executing the orders you entered. ECNs work by getting prices from numerous market participants, such as banks and market makers, and also other traders to display the best bid/ask quotes on their trading platforms. Given that an ECN broker obtains price quotations from a number of sources, expect to see tighter bid/ask spreads than what you can find from market makers. Additionally, because an ECN broker only matches trades between market participants, there's no chance of them trading against you. Market makers on the contrary could do that, and thus present a clear conflict of interest. Considering that ECNs don't have any role in determining prices, there is lower risk of price manipulation.

The Forex market is no longer exclusive to large banks, corporations, and brokers. With the advent of the Internet, people with average income can now trade currencies through ECN brokers. For more information about [http://www.icmarkets.com.au/]IC Markets and what are foreign exchange ECN brokers, please follow this link.

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