Tell me, by what parameters do you choose which one to open a trading account? Minimum deposit and transaction amount, spread and everything? The classic mistake of inexperienced traders who do not know what types of order execution are. But the broker openly hints about this in trading conditions, indicating such combinations and abbreviations as ECN, STP or Market Execution. What is the difference between them, read on.
What type of order execution to choose
1. Instant Execution (exact execution). Provides for the execution of the application at a specified price, or its non-execution at all. In the order window in the terminal, the trader himself indicates the price corridor within which the order can be executed. This type of execution is associated with the principle of work of the DC, where the trader’s orders do not enter the real market.
- the ability to accurately enter the market;
- the ability to place Stop Loss and Take Profit orders.
The main disadvantage is one – the constant requests (requotes) of the broker to the trader about allowing the opening of a transaction at a new price, which delays the time to open a transaction. This type of client order execution is not suitable for scalping in volatile markets.
2. Market Execution (execution on the market). Execution of the order in any case, whatever the price at this moment, implies the exit of the client’s application to the real market.
- instant entry into the market (these types of order execution are characterized by fast information transfer speeds);
- 100% market entry guarantee.
Disadvantage: the risk of losing money in volatile markets, you cannot set Stop Loss and Take Profit, because the order execution price is unknown.
Types of trading accounts depending on the type of data transfer:
- NDD – order withdrawal to the interbank market bypassing market makers (those who buy assets at the time of glut and throw them into the market at the time of shortage, stabilizing the price and liquidity of the asset). Provides automatic redirection of trader’s applications to liquidity providers. The invoice runs on the Market Execution type;
- ECN (electronic system) is considered a kind of NDD, the order is sent directly to the network of liquidity providers (the most famous networks are Currenex, FX Alliance, Atraix), where it is executed at the best price. Putting into the “cloud” allows you to take the best Ask price from one liquidity provider and the best Bid price from another. Pros: there is no trade “against the client”, there is no slippage, there are no restrictions on the part of the broker in the application of strategies;
- STP – one of the types of NDD, allows you to exclude the broker’s interest in the client’s deposit. Applications are sent directly to one or more liquidity providers (international banks).
For brokers who bring a client directly to the real market, ECN accounts with a resolution of 150-200 ms are most common.
Summary. Before you open a trading account, specify which types of order execution the broker supports in this case. This is usually spelled out in the trading conditions for the account, but if this information is not available, ask the broker support service for a question. And FxCash rebate service will continue to share with you useful information about stock trading.
FxCash – always informative with us!