Two types of forex brokers currently exist the most, namely ECN (Electronic Communication Network) and STP (Straight Through Processing). However, novice traders are often confused about which one is the best, because the features and services are similar or even seem like there are no differences at all. Although they have several similarities, ECN and STP forex brokers are very different in terms of order execution systems and fee structures that traders have to pay such as spreads and commissions. If you don’t recognize it, then you could be the wrong broker. So make sure you choose the best and right ones at http://www.vixbrokers.com/forex/ecn.html. However, you still need to know the difference between the two.
The advantage for traders is that the STP broker can eliminate the commission fee which is usually applied to each lot (trading volume) because the source of income can be converted into a mark-up on spread only. However, on the other hand, because a trader’s order is “thrown” to be executed by another party, the trader cannot see the Bid and Ask positions that appear in the forex market (Depth of Market / DoM). Therefore, STP brokers can also cooperate to pass trader’s orders to other companies in the same group, or pass orders to liquidity providers who provide a certain commission kickback. This drawback can be avoided if you know who the STP broker liquidity provider is, or if you use an ECN broker.
The main difference between ECN and STP brokers lies in their execution. An ECN broker acts as a “bridge” that connects traders directly with a network of international banks and other liquidity providers that build a forex market. Thus, traders can also watch the Bid and Ask positions that appear on the forex market (Depth of Market / DoM) in real-time. Trader’s orders will also be executed more transparently and responsibly, at the same rate as the rate imposed by the liquidity provider (without mark-ups). For traders, the advantage of an ECN broker is its super thin floating spreads (starting from 0 pips or less). So, choose the best ECN broker to get the best experience in forex trading.