Some brokers offer Forex accounts with special conditions and risks, such as ECN accounts or STP (Straight-Through-Processing) accounts. These kinds of accounts are designed for professional traders and usually offer much higher leverage than classic accounts. We feel it is important to choose the best forex broker; it must be someone who can meet your needs and requirements.
What is ECN Forex Trading?
ECN (Electronic Communications Network) accounts are designed for spread-sensitive professional traders. They provide an opportunity to trade at any time, and leverage may be increased much higher than in classic trading accounts. However, these special conditions usually come with a substantial risk warning. The clients of ECN Forex brokers deal with liquidity providers directly, without an intermediary. Also, ECN accounts usually have a commission fee (see account types).
What is STP Forex Trading?
STP (Straight-Through-Processing) deals are executed through the ECN broker’s Prime Brokerage services, which means that the retail trader’s trade arrives at the liquidity pool in its native format and form and is not altered in any way. The STP Forex brokers usually charge commissions for each transaction only, with no hidden fees or costs whatsoever.
What are the benefits of ECN / STP accounts?
ECN accounts typically offer a lower spread than a standard account, but it depends on your broker and other factors. However, ECN / STP transactions usually require a substantial initial deposit.
In Forex trading, the client’s profit is limited to a stop-loss level and the difference between entry and exit rates. Therefore, some brokers offer Stop Loss Protection (SLP) special features to secure trades against sudden price movements. The SLP feature can be applied to any open trade and allows the platform to automatically close orders if a loss is triggered.
Stop level loss
Different brokers have different methods of determining stop-loss levels; some use actual market price movements, while others calculate their own based on volatility that took place before closing the position. In addition, most Forex trading platforms have 2 types of SLP – one for standard accounts and another for ECN / STP accounts, which is more effective.
- Standard Stop Loss Protection – Standard stop-loss protection refers to the system automatically closing open positions with a loss when certain conditions are met. The SLP is based on actual market movements and can be applied to any account.
2.ECN / STP Stop Loss Protection – ECN / STP accounts have a more advanced SLP system than the traditional one, which calculates stop-loss levels from past price volatility. The ECN SLP is usually set up at 6% beyond the reversal rate. Thus, it is not designed to guarantee a profit or stop losses on any trade; instead, it protects only against sudden price movements in the opposite direction.
In Forex trading, margin calls may occur when the client’s account cannot support open positions at the current market rates. Having a margin call means that the broker withdraws all of your funds that are not needed to support open positions and returns them to your account.