Forex industry is growing fast. People all over the world find forex trading worth spending since it offers easy and profitable trading options to make money with a little investment.

If you are interested in this currency trade, you will need a forex broker to start with. When the options are many, it can easily confuse new traders. In this article, we will discuss two popular brokers, ECN and STP.

ECN Brokers

ECN brokers provide a clear view of the other side of a trade. It will enable the traders to know other parties who are interested in their trade that might be money managers, commercial banks, funds, or institutional traders.

However, you will have to pay for this transparency. ECN brokers have big expenses. Also, even the best ECN brokers are unable to provide micro-lots to their customers.

If some broker is claiming to offer micro-lots, then be sure that he is not a true ECN broker. True ECN brokers work in some specific conditions. They can enable you to start trading with a minimum amount.

ECN brokers offer a marketplace to enable all the participants including banks, individual traders, and market markets to trade against each other.

The best ECN brokers show the highest bid with the lowest offer. They reveal the market condition using a data window to display the order size. They offer the best possible spread and they do not mark-up spreads. They make their money from fees and commissions.

Benefits

• Better spreads deriving from different sources

• Higher liquidity & direct market

• Since the order is passed to other participants of the industry, ECN brokers cannot trade against their clients

• No conflict of interests

• The trades will remain unidentified on an ECN platform. That will help traders to execute a transaction that reflects the real market condition. They will not be guided by any strategies.

• No spread mark-up

• The executions will be carried out and the confirmation will come immediately

Cons

• You need to pay high fixed commission for each and every transaction

• You need to make a big deposit to open your account and to start trading

• Variable spreads will make it difficult to calculate stop-loss levels

• The platform is not user-friendly

STP Brokers

They pass your orders directly to a counterparty that might be STP broker, market broker, or even an ECN broker. They charge commission and also make money from the spreads.

The key benefit is that you will get both variable and fixed spreads with STP brokers. Also, they can trade against their clients, unlike ECN brokers. STP brokers are generally considered transparent.

They offer faster and better filling of their clients’ orders. The best STP brokers provide access to liquidity and interbank market structure.

Benefits

• Fast order processing and quick execution

• The correct price of the currency pairs

• Automatic execution of orders

• Clients will have the freedom to avoid quotes

• Less risk in comparison to other types of brokers

• Provide live market trends

Cons

• Price can change within a few seconds

• Major conflict interest

ECN vs STP: Which One Is Better?

From the above discussion, you might have an idea about both these types of brokers. Both have positive sides and negative impacts.

Before choosing any of them, it is important to understand your budget and objective.

For example, if you want to start investing in forex trade with a restricted budget, it is better to choose STP. STP brokers do not charge a high amount to open an account or to start trading.

Similarly, if you have a flexible budget and you want a transparent platform, you can consider choosing ECN.

ECN will charge more to open an account. As they make money from commissions, they will charge a decent commission for every transaction. However, they offer a number of opportunities to make money from forex trading.

Trading with STP brokers will be easy and fast with quick order execution. However, they will be the clash of interests as they can trade against their clients. ECN brokers are better.

They do not trade against their clients and make the process completely transparent.

Also, it is hard to find a true ECN broker in the current condition. You can find the one that combines both ECN and STP.