ECN exactly means Electronic Communication Network, and it represents the future in the Foreign Exchange Markets. In other way, the easiest explain for ECN is that it represents a connection between market participants and liquidity providers through some ECN Broker.
The connection will be done by using setup named Financial Information Exchange Protocol. At one side, broker obtains liquidity from providers and makes it available for trading to all his clients. On the other side, the broker delivers clients’ orders to providers for execution.
Traders who are working with expert advisers for automated trading also use ECN account since accounts are much more efficient. A broker, who has ECN, makes benefits per transaction, and they do that through commission fees. As higher trading volume client make, the higher is the broker’s profit.
Here are some things that show why ECN is better than standard accounts. First, ECN brokers never trade against clients. Second, Spreads are much tighter than those quoted by standard brokers. Third, ECN broker’s charge of clients is fixed. Also, commission is always transparent. And fourth, activity of ECN trading is anonymous and that allows traders to take advantage of neutral pricing, ensuring that real market conditions are reflected at all times.