ECN is an acronym for Electronic Communications Network. A Forex ECN broker does not use a dealing desk but in its place provides a marketplace where multiple market makers, banks and investors can enter in competing bids and offers and have their orders filled by numerous liquidity providers in an anonymous trading environment. The trades are done in the name of the ECN broker, providing you with absolute anonymity. A trader may have their buy order filled by liquidity provider "A", and shut exactly the same order against liquidity provider "B", or have their order matched internally by the bid or offer of another trader. The very best bid and offer is displayed to the trader along with the market depth which is the combined volume offered at each price level. A sizable quantity of market participants offering pricing to the ECN broker leads to tighter spreads. Forex ECN brokers usually charge a commission for matching trades between their customers and the liquidity providers.

Using an ECN broker to trade forex offers a variety of significant advantages, probably the most evident being narrow spreads and deep liquidity. Narrow spreads means that day traders and scalpers can take advantage of small price changes on an intraday basis. Deep liquidity ensures that substantial volumes can easily be traded without having any effect on price this is particularly important in unstable market circumstances and provides considerable rewards for traders using automated foreign currency trading systems. These two components combined mean that it is possible for you to to take advantage of more buying and selling possibilities, more opportunity equals more profit potential.

There are numerous of ECN providers available in the market today with by far the most common ECN used being Currenex. Currenex is normally employed by institutions and investment banks and out of reach for many retail traders, however in recent times as the demand for tight spreads and transparency has improved considerably a lot of commonly known retail forex trading platforms such as Metatrader have been tailored to suit ECN firms. Now a lot more than ever the gap between retail trader’s and investment banks is lessening.

It goes without saying using an ECN provider is not going to be of any benefit if you do not have a trading strategy. Formulating a forex trading strategy that takes into consideration your risk profile, lifestyle and investment is crucial before you start trading. Once formulating your trading plan you ought to then try a handful of forex platform demos to see which platform best suits your trading approach. Not surprisingly it’s imperative that you choose a forex trading platform offered by an ECN broker. It can often be difficult to determine if a forex company is in fact an ECN provider, however as a rule ECN brokers will charge a fee on your transaction rather quoting you a widened spread.