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MINTED

ECN or Market Maker Broker

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I intend to Scalp (as a test bed), but have read that many companies frown on this method, while others don't mind?

 

Is anyone using a ECN?

If so...which one and why?

 

I will using MT4?

Is that the correct one?

 

Alternatives ?

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Have a search here for 'bookies' and 'bucket shop'. Nothing wrong with using a bookie if you understand the differences. They are not great for 'scalping'. as they set the price and are often the counter party to your bets, they will get mightily miffed if you exploit minor pricing discrepancies and have an array of tools to prevent that. Those counter measure are likely to put paid to any 'scalping' efforts.

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Market Makers

 

Most brokers are market makers, which means they set the bid and ask prices on their systems and display their quotes on their trading platforms. Basically, they are connected to the interbank system to get the quotes they will use, but make up their own prices for their customers. Because they let you trade “commission free”, they build in their profit into the spread, by changing their interbank quotes and padding them for their customers. Since they offer you such great leverage, and you only need to come up with a small margin to trade a much larger amount of money, they assume all the risk. But at the same time, to offset their risk, they take the opposite position to your trade. So if you sell, they buy, and vice versa.

 

The rates that market makers set for you are based on their own best interests. They widen the spread that they quote you and pocket the difference from what they pay when placing your trades. Usually, the spreads are pretty reasonable and they make very little profit because of the competition between brokers. In order to boost their profits even more, many of them will hedge your order by passing it on to somebody else, or, they will open opposite positions and trade against you. This can lead to shady dealings like stop loss hunting, where they will see where the majority of stop loss orders from their customers are at, then spike the quotes to stop out traders and profit off their loss.

 

Pros:

 

* The trading platform usually comes with free charting software and news feeds.

* Some of them have more user-friendly trading platforms.

* Currency price movements can be less volatile compared to currency prices quoted on ECNs, although this can be a disadvantage to scalpers.

 

Cons:

 

* Because they may trade against you, market makers can present a clear conflict of interest in order execution.

* They may display worse bid/ask prices than what you could get from another market maker or ECN.

* It is possible for market makers to manipulate currency prices to run their customers’ stops or not let customers’ trades reach profit objectives. Market makers may also move their currency quotes 10-15 pips away from other market rates.

* A huge amount of slippage can occur when news is released. Market makers’ quote display and order placing systems may also “freeze” during times of high market volatility.

* Many market makers frown on scalping practices and have a tendency to put scalpers on “manual execution”, which means their orders may not get filled at the prices they want.

 

Electronic Communication Networks or ECNs

 

ECNs are brokers that pass prices from multiple market participants directly to you, and disply the best bid/ask quotes on their trading platforms based on these prices. Basically they give you the wholesale price. ECNs also serve as counterparties to Forex trading, but they profit on a settlement basis rather than pricing. Therefore you pay an actual commission, instead of an inflated spread. You will still have to pay a spread, but ECN spreads vary depending on the pair’s trading activities. You can sometimes get no ECN spread at all, and occassionally a reverse spread, particularly in very liquid currency pairs such as the majors.

 

ECNs make money by charging customers a fixed commission for each transaction, therefore they do not make or set market prices or their own bid/ask quotes. They provide the best quotes on the interbank system and charge you a commission for trading. What this means is that the risk of price manipulation by the ECN is reduced or eliminated for retail Forex traders. They profit whether you win or lose, and don’t take positions against you, so there is no need to be shady.

 

Pros:

 

* You can usually get better bid/ask prices because they are derived from several interbank sources.

* It is possible to trade on prices that have very little or no spread at certain times.

* Genuine ECN brokers will not trade against you as they will pass on your orders to a bank or another customer on the opposite side of the transaction.

* Prices may be more volatile, which will be better for scalping purposes.

* Since you are able to offer a price between the bid and ask, you can take on the role as a market maker to other traders on the ECN.

 

Cons:

 

* Many of them do not offer integrated charting and news feeds.

* Their trading platforms tend to be less user-friendly.

* Because of variable spreads between the bid and the ask prices, it may be more difficult to calculate stop-loss and breakeven points in pips in advance.

* Traders have to pay commissions for each transaction.

 

Seems to me, that because the spread that Market makers take, and possibly working against you, that ECN looks a better option?? Am I right here? Can anyone recommend a good ECN broker?

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Minted,

 

have you thought about scalping a futures contract instead?

 

The 6E (EUR-USD) for example.

 

Futures markets are regulated and the 6E is scalpable.

 

 

Hal

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?????????????????????

 

In my view:

 

Scalp: 5 to 10 ticks. (Maybe even less.)

 

-----

 

Further question: How large in $ should be your test bets?

 

The amount might be very different for different people.

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In my view:

 

Scalp: 5 to 10 ticks. (Maybe even less.)

 

-----

 

Further question: How large in $ should be your test bets?

 

The amount might be very different for different people.

 

Thanks Hal,

 

I was just pointing out to the OP that it is rude to come asking folks for help, and then ignore them when they request additional information.

 

Best Wishes,

 

Thales

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Thales..........no intention on my part to be RUDE. I think others on here were worse. I didnt reply, as I get the impression no one wants to help.

 

"Define scalp" ?

 

If you want the dictionary answer......I want to trade short term, anything from M1 to H1...

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"Define scalp" ?

 

If you want the dictionary answer......I want to trade short term, anything from M1 to H1...

 

Not for nothing, but I still have no idea what it is you are trying to accomplish.

 

Good luck, though.

 

Best Wishes,

 

Thales

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Hi there,

 

Define scalp.

 

Best Wishes,

 

Thales

 

scalp is one trading strategies which targeting for small amount pips. from 5-10, it's a simply fast exit strategies, mostly used on market volatility.

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