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An ECN-like broker uses an electronic communications network with straight through processing (STP) and direct access, enabling forex trading directly with liquidity providers without dealing desk interference. This results in access to ECN-style financial markets where forex brokers can achieve lower spreads and superior execution speeds when compared to CFD market maker brokers.
Compare the best ECN brokers through the table below.
By Justin Grossbard / Updated: Tuesday, January 07th, 2020
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A comparison of the best ECN (Electronic Communications Network) Forex Brokers established that Pepperstone was the best forex broker in 2020 based on the following services/features:
Thefastest execution speedsof any ECN Forex Broker
The leadingtrading platformsincluding MetaTrader 4 ECN & cTrader
A range of financial markets includingCFD marketsoffering indices to crypto
The overall rating is based on review by our experts
Pepperstones Has The Fastest Trade Execution Speed
Pepperstone is the best forex broker in Australia, UK and Asia-Pacific when it comes to trade execution speeds. Their direct market access (DMA) leads to exceptional ECN-like trading speeds thanks to two key features:
1) A direct optical fibre connection to trading servers
The sheer distance between Australia liquidity hubs can be a disadvantage for Australian traders.
Pepperstone offset this through a direct optic fibre connection from Sydney to New York.
The end result is a reduction in up to 10x times latency for Australian and Asian-Pacific traders.
Just having a fast connection isnt enough if the server has a poor response rate.
To overcome this, Pepperstone partnered withEquinixthat have servers near Wall Street.
Equinix houses over 60 exchanges and over 400 sell and buy side firms.
Not only do currency exchange firms use these servers but also banks which Pepperstone can directly exchange data with.
One of the things that make Pepperstone perhaps the best forex broker is the broad choice of platforms they provide for customers. Below we review the 3 most popular platforms:
This is the worlds most popular ECN (electronic communications network) forex platform due to the easy to use yet advanced interface providing an institutional style trading experience. MetaTrader 4s interface also offers enhanced charting to track detailed market fluctuations, allowing retail investors to develop complex trading strategies and risk management techniques.
MetaTrader offers an expert order management tool providing control to traders. The platform uses MQL language for developers and Expert Advisors for automated strategies.
cTrader was created by forex traders with the focus of creating a user friendly platform. Features include detachable charts, pre-set charting options and an easy order system.
By using cTrader, Pepperstone clients can access liquidity from Goldman Sacks and other institutions. By accessing tier on liquidity providers low ECN-like spreads can be achieved on most currency pairings. Additionally, cTrader provides the ability to conduct automated trades and back-testing for strategies.
Metatrader 5 (MT5) shouldnt be viewed as a newer version ofMT4but rather aplatformsuited for those looking to trade more than purely forex. The MT5 platform has superior CFD trading functions and analytical abilities, and if built in the MQL5 language with similar syntax to that of C++ programming language. Additionally, MT5 provides:
Pepperstone offers 500:1 spreads which is high considering its one of the elite ECN-like forex brokers.
500:1 is extremely high by both local and international standards and means that you can effectively trade 500 times your deposit. This means that a $100 deposit will allow up to $500,000 on currency markets maximising both profit potential and the associated risks. An example is a movement in currency of 0.02% which is relatively modest would almost leave a trader to either double their money or lose the whole amount. High leverage comes with high risk. For instance, in a volatile market being highly leverage can mean your capital is at risk, and therefore 500:1 leverage is not suitable for all investors.
Pepperstone allow scalping and real time foreign exchange data for automated trades that rely on 500:1 leverage. Market access to the full range of financial instruments of the key reason why the forex ECN broker dominates automated traders.
Pepperstone is one of Australias fastest-growing companies not only based on their execution fees but also their spread. With no dealing desk (NDD) on the Razor trading account spreads can be as low as 0.0 pips. These ECN-like spreads are on-par with other financial institutions intra-bank rates, that most retail forex brokers are unable to achieve.
Below shows Pepperstone variable spreads as of June 2019. As the table highlights, many major currency pairings start at 0.0 and average at approx. 0.3 for Razor ECN accounts which also has additional minor trading commissions. The standard account, on the other hand, has fixed commission included in the bid/ask spreads.
The main competitor to the Pepperstone Razor account is the True ECN offered by IC Markets which are also one of Australias direct access and no dealing desk brokers (NDD). Pepperstones ECN-style Razor Account (on MetaTrader) has the same commission of $3.50 per side ($7 per round turn) while their cTrader ECN-like trading account has a slightly higher commission of $3.00 USD per side. A fullIC Markets vs Pepperstonecomparison table compares the two.
Accounts can be funded through a variety of payment methods including credit cards, bank transfers and bPay. In fact, all major payment portals are offered by Pepperstone including PayPal which is often not offered by many forex brokers.
All traders can open a demo account and a live account. A demo account provides real-life trading conditions allowing individuals to test trading strategies prior to opening a live account. Some elements like re-quotes of slippage many not exactly simulated compared to a live account which should be factored. That said the trading conditions are close enough to get a feel for forex markets and trading forex in general.
The initial deposit required by Pepperstone if $200 USD. This is approximately $300 Australian Dollars but their website says the minimum is not actively enforced. This means that smaller minimum deposits is often accepted.
There are five core markets Pepperstone offers forex traders with various leverage levels. Overall, there are of 150 instruments offered by the ECN forex broker.
Currency trading is the most popular instrument worldwide with $1.5 trillion traded on the forex market each day. Pepperstone not only offers a true ECN forex trading environment but also offers over 60 currency pairs with leverage up to 500:1.
With a leverage of 10:1, individuals can trade over 50 of the most US stocks. A short or long position through a share CFD can be held so you can predict increases or decrease in share price value.
Similar to a share CFD, index CFDs allows traders to predict upward or downward movements on the 14 major stock market indices in the world. This includes the Australian 200, UK 100 to US Wall Street 30 Index.
There is the option to trade different commodity classes with leverage to profit/loss based on price movements. The most popular asset classes include gold and silver, platinum and palladium, soft commodities and energy including oil. These commodities can be traded in relation to the Australia dollar, US dollar or the Euro.
Crypto is traditionally volatile and with leverage offered by Pepperstone of 5:1, this can lead to high profits and losses. The cryptocurrency pairings offered are Bitcoin, Bitcoin Cash, Ethereum, Dash and Litecoin. These should only be traded both those with a high-risk appetite.
The only financial service they dont offer is stockbroking services which may lead some traders tochoosea different broker. That said, those looking for a low fee broker with the best forex broker trading platform and currency trading options, Pepperstone is the logical option.
ECN stands for Electronic Communication Networks and in simplistic terms, it allows forex trading direct access to deep liquidity pools on the interbank market. This means that similar to the stock market you can execute trades directly with other participants in the market with the ability to see buy/sell orders (or in currency markets bid/ask spreads).
ECN Forex brokers essentially match trades between individuals and cant make trades against their own clients. This provides peace of mind for some forex traders as they may be worried that the broker may trade against them which has occurred in the past by poorly regulated and run brokers.
The opposite of an ECN is a market maker forex broker. These brokers can make both ask and bid prices which they can take from their customers. This means that the forex broker will take the opposite position to their traders positions and must buy/sell from you when trades are made. These brokers often have higher spreads but may offer some enhanced features such as guaranteed stops which may make them more suitable for beginner traders.
Electronic Communications Networks or ECNs essentially help speed up the settlement of trades between brokerage houses and individual traders. With an ECN, no 3rd party or middle man exists. This helps to reduce settlement costs as there is one less party involved in a trade that needs to get paid.
An ECN also helps by allowing traders in a range of geographical locations right around the world to access financial markets no matter where they are. It also allows them to trade quickly and seamlessly.
Straight through processing or STP is another name that describes a true ECN broker. Brokers that offer STP on their platforms, place client orders directly with liquidity providers such as banks or institutional brokers without them passing through a dealing desk. Not only does this promote faster trade execution speeds, STPs also allow for greater market depth and transparency. The same bid/ask prices (spreads) are passed onto the client but STP brokers are usually compensated for offering this service via a small fee/commission.
Pepperstone is regulated in Australia by ASIC and the FCA in the UK and is audited by Ernst & Young. This means they must meet strict guidelines such as training standards, avoid conflict of interest and the requirements for customers deposits to be segregated in a separate account. They are not regulated by CYSEC which may limit some market participants. They are one of thelargestAustralian forex brokers and are gaining market share in the United Kingdom where they are relatively a newcomer.
Compare forex brokers was created by a team that has worked withforex providersover several years. The aim of their comparison tables has been to simplify the process of comparing brokers to find the best forex broker for individual Australian forex traders needs. Anotherreview of Pepperstoneexists in the Australia section. The tables were made based on information from true ECN broker websites and market maker websites with no automation used to compile information on the tables orreviews.
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