By: Charley Warady
MetaTrader 4 is the Forex trading platform offered by over 60% of all Forex brokers and used by 90% of Forex traders. ECN puts the Forex trade out there with interbank and the whole market. A few years ago the idea of MT4 ECN was said to be impossible. Now it's not.
MT4 is for the market maker
Without question, the MT4 platform was built for the retail Forex trader. It is intuitive, simple, and provides everything the experienced Forex trader needs as well as the novice. It makes buying and selling as easy as a click as well as many other features.
The thought of MT4 ECN seemed, at first, even unnecessary. The initial reaction to the concept seemed like it would never happen. The Forex trader, if he wanted to use the standard platform was supposed to trade only with whom his broker determines advantageous to the broker. However, the demands of the retail Forex trader eventually became heard.
ECN with a spread
ECN trades go out into the general market. It's traded through interbank and large financial institutions. The spread between pairs is negligible if anything at all. Usually Forex brokers that deal with ECN charge commission specifically for this reason. They're not making money from taking the other side of the trades. And because they are dealing with interbank and large financial institutions, the margin is much higher and the trading allotment is greater.
However, when you're talking about MT4 ECN you're talking about the regular retail Forex trader, with the same assets, utilizing the standard platform and having his trades reach the general and “real” marketplace.
The good side
The advantages of MT4 ECN are pretty obvious. The Forex trader doesn't have to worry about his trade getting lost in the shuffle, or even having the trade refused. Orders are seen by others in the marketplace. The pool is larger and the order price might be touched and filled as opposed to always having to go through the price in order to guarantee a fill.
The spread is tight and the orders are executed much quicker. There are no re-quotes; market orders are all filled at the best price possible. There is no conflict of interest. The Forex broker isn't on the other side of the trade.
The other side
It may not be a disadvantage, but perhaps a simple fact that must be taken into consideration. The volatility involved in MT4 ECN is exponentially increased. You're dealing with interbank Forex market here. Literally, you're playing with the big boys. The market isn't slowed up for anybody, whereas with market makers it is a more controlled environment. Plus, as opposed to dealing with market makers, the MT4 ECN situation is dependent on volume, so the Forex trader should always make sure he's in a liquid market. With Forex market makers, whether or not a Forex trade is filled has nothing to do with volume.
There are several Forex brokers now that offer the possibility of this kind of trading. Some even have a stand-alone platforms. A simple search will give you the list and then it's time to do your research.