Reasons to Trade with an STP/ECN Broker

The only reason why people risk all their money in any investment is to make potential gains. Every trader has a different strategy and broker preference in order to do so. But the task of finding the right broker can be very much daunting and time-consuming for beginners. Currently, you can see three main broker types in the market: Market Makers, STP and ECN. The worst of them all are market makers when it comes to returns. On the other hand, STP and ECN brokers are gaining massive popularity because they are much more profitable and trustworthy compared to market makers. Let’s dig deeper into what STP/ECN brokers offer and how they can be beneficial for you.

Typically, an STP/ECN broker is able to make the most profits which is not possible with market makers. The reason is market makers follow the brokerage model, where they tend to make money from clients’ losses. However, this is not the case with STP/ECN brokers. 

ECN brokers make use of an Electronic Communication Network system which lets traders automatically match and trade according to their preferences. In this way, traders are able to execute their trades in a much more direct manner. Similarly, STP brokers utilize the Straight-Through Processing system through which trades can be carried out without any manual interference. Both are highly beneficial in lowering the intermediary costs and manual operations, eventually leading to more profits for a trader.

Another significant reason why ECN/STP brokers bring in more profits is that there is no conflict of interest on the broker’s part. It is commonly seen that market makers want their clients to lose so that they can make money. Thus, they will do their best to modify or restrict your strategy to limit your profit in the process. This is the reason many traders prefer to deal with ECN/STP brokers because they have the same goal as you, which is to help you make more profits. The reason is their commission is directly based on the profit you will be making on a trade. Therefore, your win is their win, which is not the case for market makers.

One more good reason to trade with an STP/ECN broker is that they let traders maintain anonymity while trading. They do their best to protect your personal information, trading strategies, previous trades and more. All of this will ensure you better profits and good standing in the market. Furthermore, when you choose an ECN broker for your trading needs, there is no room for market manipulation, and you get to take advantage of real-time trading.

With ECN brokers, traders can access market prices directly, which they can’t do with market makers. The level of transparency ECN brokers bring makes them highly trustworthy among traders. In addition, traders no longer have to deal with requests when they opt for an ECN broker. Requests generally happen with market makers because there, you can’t directly access the market prices and therefore have to request requotes again and again. But by removing desk dealers (market makers) from this equation, you can directly access the market without having to ask for multiple requotes, which has an adverse impact on your trading portfolio.

When it comes to brokers, ECN is the most convenient system to employ because it helps them cut down their expenses, minimize errors and have a stable revenue stream. However, all this cannot be achieved if they go with the market maker model where profit fluctuates considerably. All in all, ECN is best suited for both traders and brokers as it is intended to create a stronger and more amicable relationship between the two.