Despite their respective reputation among traders, both ECN and fixed spread have advantages and disadvantages. How to know which one is better for you?
ECN brokers and fixed spread brokers make money in different ways. Understanding how these brokers charge their clients is very important so you can maximize your profit in trading.
ECN brokers are a type of forex broker that displays bid/ask prices on their trading platform based on live price streams from liquidity providers, most certainly without any manipulation. As a result, many traders prefer ECN brokers, especially for those whose trading system requires high accuracy in pricing and order execution.
When choosing an ECN broker, the first thing you need to know is that true ECN brokers do not make a profit from spread, but rather charge commission fees on each traded lot. Spreads on ECN accounts will always float, depending on market condition and corresponding to prices provided by their liquidity providers. Instead of spread, the commission fee is more important when you choose an ECN broker.
Another important aspect to consider is regulation. A broker is worthy of being called the best if it is licensed by credible regulatory bodies, not offshore or even unregulated. In this case, choosing a CySEC-regulated ECN broker is perhaps a controversial decision. However, since CySEC Cyprus is a member of MiFID, it holds a license that is applicable across the European Union countries, thus it can be considered a decent option.
Next, you should also consider the features that a particular type of account offers. For example, a broker may offer instant execution in a standard account, but the option for market execution is made available only on the ECN account. When registering on a forex broker, make sure you have paid attention to this as the features offered vary among brokers.
Obviously, the ECN broker you choose also depends on how much funds you have and what money management strategy you want to apply. Hence, take a look at the minimum deposit and maximum leverage that fit your trading plan.
Lastly, check what trading platforms are provided by the broker. Some say that a truly great ECN broker must not offer the MT4 platform because this platform is prone to manipulation by the brokers, thus intervention can always occur. The reality is, however, the MT4 is still the favorite among traders. That's why the list below includes brokers that offer the MT4 as their primary offering and other types of platforms as alternatives that can be chosen for ECN trading.
Here we've compiled a list of the best ECN forex brokers.
- IC Markets
Fixed Spread Brokers
A spread is the cost of trading charged by brokers, which is calculated from the difference between the bid and the ask price. The smaller the difference, the higher the profits. However, a spread tends to fluctuate, always changing depending on the price movement. In volatile markets, a spread can widen significantly.
This condition leads to the emergence of fixed spread. As the name implies, this type of spread promises a more stable spread cost, thus it is more reliable for traders to apply a consistent money management strategy. This is one advantage of trading with a fixed spread. What are the other advantages? And what are the drawbacks of fixed spread?
The Pros of Fixed Spread
- You can trade without having to worry about erratic spread fluctuation
- It is easier to implement money management. The potential profit and loss can be calculated more easily since you have a more definite estimation of how much spread you get for each trade.
- It gives you protection from extreme spread widening. As has been mentioned earlier, normal or floating spread can jump drastically during high volatility. In this case, a fixed spread can protect your position from a volatile market.
- A fixed-spread account can make trading with EA easier.
- It is suitable for beginners who are not ready yet to deal with spread fluctuation. The fixed spread can also help new traders learn about how to determine and implement money management more easily.
The Cons of Fixed Spread
- It is usually higher than the floating spread. For example, if the minimum floating spread for the EUR/USD starts from 1 pip, the fixed spread for the same currency pair can be as high as 3 pips. Still, considering that a floating spread is reactive to market fluctuation, you must prepare yourself for spreads that are multiple times higher than the standard value. On the other hand, the 3-pip value of fixed spread is generally stable.
- It doesn't match the market price. Brokers who are able to offer fixed spread determines the range of bid and ask price themselves. It is impossible to give fixed spread if they truly follow the market price.
- Fixed spread can still change when faced with highly extreme market conditions. This can happen either around the release of unexpected news that shock the market. That being said, this change rarely occurs and generally the difference is not too big. Brokers also would send notifications should there is a temporary change on a fixed spread.
- It is more susceptible to requote.
- Order execution can beed.
Since there are many forex brokers today and become more competitive, it won't be difficult to discover a broker that offers the most ideal fixed spread for you. Some forex brokers that we recommend below may be an option for you to consider.
InstaForex is an international broker that provides trading services to traders globally. Since it was founded in 2007, InstaForex has provided for clients from various countries as many as 7 million traders. Based in Kaliningrad, Russia, InstaForex always attempts to improve the quality of the company in order to captivate the hearts of their clients.
Their hard work can be proven, one of which is by achieving a variety of awards, including Best Forex Cryptocurrency Trading Platform 2018 by UK Forex Awards, Best ECN Broker Asia 2018 by IBM, Forex Broker of the Year for Eastern Europe 2018 according to le Fonti Awards, Development, and Success award at Financial Olympus 2016-2017, etc.
There are 4 types of account offered by InstaForex representing a universal trading tool that help to work on international financial markets, such as Insta.Standard, Insta.Eurica, Cent.Standard, dan Cent.Eurica. Trading account types differ by the methods of accounting spreads and commissions, which are picked by the trader opening an account.
Insta.Standard account is relevant for standard trading terms on the Forex market and allows a trade to be settled with classical spread and with no fees. Traders will be charged a fixed spread every time they make a transaction. Spreads that are provided ranging from 3-7 pips. The main advantage of this type of accounts is its universality, as a trader can change the trading leverage and work with a deposit size convenient for traders.
Different from Insta.Standard accounts, Insta.Eurica accounts do not require payment of any spread on opening a deal. Therefore, this type of InstaForex account is suitable for beginner trader with a minimum transaction of 0.01 lots.
There are also other types of accounts InstaForex, namely Cent.Standard and Cent.Eurica which can be used for beginner traders because they can use the minimum transaction volume, which is 0.0001 lots (the cost per lot is USD0.1 cent). Deposit currencies that can be used by traders are EUR and USD (for all types of accounts).
Trading in InstaForex is quite a given as traders can choose to trade with leverage between 1:1 to 1:1,000. With a minimum initial deposit requirement of only USD1 (for all types of accounts), InstaForex clients have the opportunity to get a 30% to 100% deposit bonus.
Not only that, but beginner traders are also exempt from confusion in determining forex trading strategies. Because Instaforex provides ForexCopy services that allow traders to copy orders from professional traders in just a few minutes.
And then, there are around 300 trading instruments offered by InstaForex for traders. In addition to currency pairs, there are also futures, shares, gold, silver, CFDs, Bitcoin, and others.
Every InstaForex client is free to choose a trading platform that can be tailored to their needs. There are four types of trading platforms available, including InstaBinary, WebIFX, MetaTrader4, and MetaTrader5. Each platform has advantages and disadvantages. InstaForex also provides video tutorials on how to register on each platform. It aims to make it easy for beginner traders who want to join InstaForex.
If a trader still confused after seeing the video tutorials, traders can contact customer service available 24 hours connected to various social media, including email, Skype, Whatsapp, Telegram, Viber, Twitter, and Phone Call. On the InstaForex website, there are around 30 languages provided to facilitate traders from various countries.
The trader can also help themselves with trading calculators provided on the InstaForex website. Traders can accumulate currency pairs, Leverage, volume, and currency used.
The payment system in InstaForex is also diverse. Traders can pay deposits via Visa, Mastercard, Skrill, Neteller, PayCo, as well as Wire Transfer. All in all, InstaForex is a well-rounded broker for many types of traders.
One thing that makes this broker stands out is it offers various types of account with attractive spread concepts. On InstaForex, the Insta.Standard and Cent. Standard accounts have 3-pip fixed spreads for the EUR/USD. Nonetheless, the broker also explains that the fixed spread can go as high as 7 pips during certain market conditions.
If the range of fixed spread is 3-7 pips, is InstaForex still worthy of being called a true fixed spread provider? It must be noted that fixed spread can still change, so fixed spread disclosure indicates transparency from InstaForex.
Since 2009, the action of FBS Holding Inc. or known as FBS in the world of forex trading has been recognized by various international institutions. With clients reaching 14 million as of 2019, FBS has received the title of Most Transparent Forex Broker 2018, Best Investor Education 2017, Best Customer Service Broker Asia 2016, IB FX Program, and many others.
FBS is regulated by FSC Belize and CySEC Cyprus. This broker has been trusted by millions of traders and 370 thousand partners from various countries. Based on their data, FBS garners about 7,000 new traders and partner accounts every day. And, 80% of the clients stay in the FBS for a long time. No wonder the broker is growing rapidly due to the incredible growth in the number of clients.
Trading products offered by FBS range from forex, CFD, precious metal, and stock. For forex trading, CySEC-regulated FBS offers leverage up to 1:30 on Cent and Standard Accounts. Clients who want to try higher leverage than that can alternatively register an account under FBS Belize.
FBS spread begins from 0.5 pips for Pro account type and from 0.7 pips for Standard and Cent accounts. On a standard account, volume orders can be made from 0.01 to 500 lots. Therefore, this account is recommended for experienced traders.
Whereas on Cent Accounts, volume orders can be carried out with a maximum of 500 cent lots or the equivalent of 5 standard lots. Cent Accounts involve a different level of risk. FBS recommends Cent Accounts for beginner traders. All account types support the following trading instruments: 36 Forex pairs, 8 metals, 3 energies, 11 indices, 127 stocks, 5 crypto pairs.
Before plunging into the real forex market, traders can practice with FBS Demo Account which consists of two types, i.e Standard and Cent.
FBS uses the MetaTrader 4 and MetaTrader 5 platforms. They offer them on Windows and Mac as well as Android and iOS mobile. These platforms provide a trading experience at traders' fingertips, allowing traders to progress as a trader anywhere at any time.
MetaTrader platforms also have a variety of mainstay features, including the possibility to create, buy, and use expert advisors (EA) and scripts, One-click trading and embedded news, technical analysis tools, the possibility to copy deals from other traders, hedging positions, and VPS service support.
Another advantage provided by FBS is a deposit bonus of 100% for clients who fulfill certain requirements. The process of FSCing and withdrawing funds can be run easily and quickly. Based on clients' testimonies, each process usually takes no more than 3-4 hours, except on holidays.
Traders also have the opportunity to develop a side business when trading with FBS, namely as an Introducing Broker (IB) or Affiliate. The FBS partnership system provides partner commissions that are already in 3 level positions. Only by introducing new clients to FBS according to certain procedures, traders can earn extra income.
Traders will also get trading education experience at FBS. They have prepared a comprehensive forex course. The course consists of 4 levels: beginner, elementary, intermediate, and experienced. Traders can take courses that will turn them from newbies to professionals. All materials are well-structured. Besides, FBS provides various forex analyzes, webinars, forex news, and daily market analysis that can be accessed easily on their site.
Traders can access the FBS website with many language choices. Of course, this will increasingly provide comfort for traders. Available languages include English, Italian, French, Portuguese, Indonesian, Spanish, and others. Live chat support is also provided 24 hours 7 days a week.
In conclusion, FBS is a widely known broker among retail traders around the world. It continually grows to become a preferred broker because of flexible trading conditions that enable its clients to trade with various instruments, low deposit, and other trading advantages.
FBS started their operation in 2009 and has since added fixed spread feature which starts from 3 pips. Unlike InstaForex that offers fixed spread on two types of accounts, FBS activates this feature only on their micro account. It is a recommended account for new traders, as the minimum deposit is only around $5, while the minimum trading size is micro-lot or 0.01 in standard lot. Furthermore, this broker gives other attractive features in the form of free education programs for traders and copy trading.
FirewoodFX is a good contender in the retail forex trading industry since it offers competitive features such as fixed spread and swap-free accounts as defaults in all account types. However, choosing a FirewoodFX account can be quite dilemmatic if you take the minimum deposit and fixed spread into account. The micro and standard account offer a minimum deposit of $10 and a fixed spread that starts from 3 pips and 2 pips respectively. Meanwhile, the minimum deposit of the premium account is higher ($100) but the fixed spread starts from only 1 pip.
Best Tips to Choose a Fixed Spread Broker
Obviously, different brokers have different fixed spreads on different types of accounts. To gather more information, you can check the specification of fixed spread on each broker's website.
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You can examine all the pros and cons of fixed spread, compare it with floating spread from an ECN account, and adjust it to your trading needs and conditions. Don't forget to try it out on a forex demo account before using it for live trading.
Brokers usually write the minimum spread for the EUR/USD currency pair as the standard. You can make this a point of reference when comparing the fixed spread between brokers.
Also, understand the feature for each account, as brokers may put additional requirements for a fixed spread account. After all, this service is a special feature that is still absent in many brokers.
See Also: Lowest Spread Forex Brokers For EUR/USD
True ECN brokers only charge commission fees and do not make money on spread difference. Therefore, it is in their best interest for traders to make profits from their traders. If you keep on winning, you will most likely trade on larger volumes, thus giving them more income from the trading fees.
Fixed spread, on the other hand, can help traders in many ways. From compatibility to automated trading to easier money management, fixed-spread brokers provide traders with such convenience that is not found in the floating spread system. To figure out further on the comparison between the two types of spreads, look into Fixed Spread Vs Floating Spread: 5 Things You Should Know.