What is/are the difference/s between ECN and standard accounts?

<p id="isPasted">The main difference between ECN and Standard accounts is the way orders are executed and the type of spreads offered.</p><p>ECN (Electronic Communication Network) accounts provide traders with direct access to the interbank market, where liquidity providers (such as banks and other financial institutions) compete to offer the best bid and ask prices. The ECN acts as a bridge between the trader and the liquidity providers, and orders are executed based on the available liquidity in the market. This means that ECN accounts typically have variable spreads, which can be as low as 0 pips during times of high liquidity.</p><p>On the other hand, standard accounts often offer fixed spreads, which means that the spread remains constant regardless of market conditions. These spreads are typically higher than those offered by ECN accounts, as the broker acts as the counterparty to the trader's orders and may take a markup on the bid/ask spread.</p><p>Another difference between ECN and Standard accounts is the level of transparency and order routing. With an ECN account, traders can see the order book and the available liquidity in the market, which allows for greater transparency and potentially better execution prices. Standard accounts, on the other hand, may not offer this level of transparency and may route orders through the broker's own liquidity pool.</p><p>It's worth noting that ECN accounts may have higher trading costs in the form of commissions, as traders are charged a fee for each transaction. Standard accounts, on the other hand, may not charge a commission, but instead, make their profit from the markup on the bid/ask spread.</p>

<p>One of the main differences between ECN (Electronic Communication Network) and standard accounts is the type of liquidity provider that the broker uses to execute trades. In a standard account, the broker acts as the market maker and takes the opposite side of the trade. This means that the broker may have a conflict of interest and could potentially manipulate prices to benefit themselves. In contrast, an ECN broker connects traders directly with liquidity providers, such as banks and other financial institutions, allowing for a more transparent and fair pricing model.</p>

<p id="isPasted">ECN accounts offer faster and more accurate trade execution, as orders are executed directly in the market without the intervention of a broker. In contrast, standard accounts may be subject to delays or re-quotes, as the broker may need to fill the order from its own liquidity pool.</p><p>ECN accounts also typically have higher minimum deposit requirements compared to standard accounts, as they offer more advanced trading features and require direct market access. Additionally, ECN accounts may charge commissions on trades, whereas standard accounts may only charge a spread.</p>

<p id="isPasted"><strong>There are some significant differences between the two account types:</strong></p><ul><li><p>ECN trades are executed when the broker connects the trader directly to liquidity providers. This is a&nbsp;non-dealing desk model. Standard account trades are filled from within the broker’s partner pool, rendering this a market-making model.</p></li><li><p>ECN accounts simply match orders and charge a commission per trade for the service. ECN accounts&nbsp;do&nbsp;not&nbsp;place a premium on the raw spread, which can be as tight as 0.0 pips.</p></li><li><p>By contrast, standard trading accounts apply premiums to the raw spreads as their primary revenue line. As a Standard Account holder, it is&nbsp;widespread practice for you to pay a two-pip spread&nbsp;on most currency pairs. As the counterparty to your transaction, the broker needs to make money from the trade.</p></li><li><p>ECN accounts come with a lower effective fee amount than standard accounts. We will show you how this works out later in the article.</p></li></ul><p><strong>Pros and Cons of an ECN Account</strong></p><p>Here are some key factors to consider before opening an ECN account:</p><p><strong>Pros Explained</strong></p><ul><li><p>The main benefits of the ECN account can be grouped into&nbsp;transparency, fairness, and speed. With ECN trading, all brokers have access to the same information in the form of a market newsfeed that shows up-to-the-minute pricing, including price history.</p></li><li><p>This means there is&nbsp;ample information&nbsp;that allows traders to spot trends in the market. There is also less chance of price manipulation, something that traders appreciate as their skill levels improve and they come to better understand the trading landscape.</p></li><li><p>ECN trading provides a faster-paced institutional level of transacting. It is much more akin to how professionals trade. ECN brokers thrive on high trade volumes, something that can only be achieved when you get large numbers of skilled and knowledgeable traders working together in a bustling marketplace.&nbsp;</p></li><li><p>ECN brokers allow investors a way to trade outside of normal trading hours. This is an effective way for traders who cannot take part in the market during standard working hours to partake in it.&nbsp;ECN accounts provide greater flexibility&nbsp;as they provide electronic access to markets on a 24/5 basis.</p></li><li><p>ECN brokers offer superior privacy. For those worried about their information being transmitted over electronic channels, there is an elevated level of anonymity to ECN trading as all participants invest in the most up-to-date security features.</p></li><li><p>Over the long run, ECN trading is&nbsp;less expensive on a per-trade basis&nbsp;than using a standard account. We will explain this more in the fees section of this article.</p></li></ul><p><strong>Cons Explained</strong></p><ul><li><p>ECN&nbsp;liquidity can sometimes run low. Often, when important economic news is about to break, traders will choose to hold off on trading. It could even be liquidity providers that throttle supply in anticipation of a rise in demand. This can cause trading lulls in which&nbsp;liquidity is scarce due to market dynamics.</p></li></ul><p><strong>Pros and Cons of a Standard Account</strong></p><p>Here are the factors to consider before opening a standard account:</p><p><strong>Pros Explained</strong></p><ul><li><p>Standard accounts are easy to handle and the cost of execution, although a little higher than some traders prefer, comes with the benefit of predictability. Working with fixed spreads is unthinkable to some traders as it seems restrictive, but other traders, especially novices, sit on the other side of the fence and appreciate the predictability of fixed spreads.&nbsp;</p></li><li><p>Knowing that each trade will cost you two pips regardless of market conditions could&nbsp;work for traders in times of volatility. Knowing exactly what fees to expect makes it easier to plan.&nbsp;Swing traders&nbsp;enjoy this type of account.</p></li><li><p>A swing trader takes up longer positions, from a few days to several weeks. They intend to take advantage of currency swings that can be predicted from world events. By locking in the spread of two pips, they are in a&nbsp;better position to know when they can profitably call in the trade.</p></li></ul><p><strong>Cons Explained</strong></p><ul><li><p>If you are a frequent trader, you might be paying something like 1.3 pips extra per trade on a standard account versus an ECN account. This inflated cost of execution adds up in the long term.&nbsp;</p></li></ul>