Which brokers offer double up feature

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How Useful Are Double Up, Rollover, and Early Closure?

Three of the most common trading tools provided by binary options brokers are double up, rollover, and early closure. These tools allow you to maintain some level of control over your trades while they are open. When binary options brokers do not provide these tools, your trades are literally out of your hands until they expire. Brokers that do offer them are giving you the chance to make decisions about your trades. But how useful are they? Which of these tools is the most important?

Double Up

Double up is a tool which allows you to double your investment. Your trade stays open the same length of time it originally was going to; your expiry does not change. All that changes is your risk and your potential reward. Let’s say for example that you decided to invest $10 on GBP/JPY, and you clicked “Buy.” Your High/Low trade is set to expire shortly, and you have every confidence that GBP/JPY will only continue to rise. At this point, you could click “double up” to invest $20 on GBP/JPY. The trade will expire at the same time in the same direction. If you win, you get the payout for a $20 investment instead of the payout for a $10 investment.

There is a catch, of course. Not all brokers handle doubling up exactly the same way, but generally, when you choose to double up, your broker will move the entry rate to the current rate at the time you clicked “Double Up.” If your GBP/JPY trade were to fall below that rate at the expiry time, you would lose your trade, even if the position closed above your original entry rate. If that were to happen, you would end up losing a trade you originally would have won, and you would lose twice as much on the investment.

For that reason, you have to be incredibly sure of what you are doing when you use double up. It is not enough for the current price to be far above/below the original entry price. It needs to be moving steadily in the direction you are betting on, because only the new entry rate will matter when the win or loss is calculated. Double up can be useful, but only in these limited situations.

Rollover

Rollover is another potentially useful feature which can add to your reward—but also to your risk. When you use rollover, you extend the actual expiry time of your trade. This is not an easy way to get out of losing a trade you think you might win if you stay in longer, though! In that sense, it is very different from extending a Forex trade (if you are familiar with FX trading, you know what I am talking about). Deciding to stay in the trade increases your risk, because you are required to add to your investment. Thirty percent is a typical amount of increased risk which a broker may require to rollover a trade.

When would you use this feature? You would not want to use it if a trade has turned totally against you. If you have a good cause to believe that there is a really substantial chance that extending the expiry will result in a win, you might want to use it—but you would have to be pretty certain, because otherwise you will simply lose more money. If you do win, awesome—you have won an additional 30% on top of your original investment. But if you lose, you lose more than you planned to wager.

You might want to use it if you are already winning a trade, but most brokers do not allow you to do this. They will only let you rollover your trade if it is not in the money at the time that you click “rollover.” Because of this, it is generally a risky move, and not the most useful tool you are going to find. If you test a strategy where rollover is useful, you may find it advantageous now and again. Otherwise, though, you may simply want to avoid it, as it will mess up your money management plan. Rollover is perhaps the least useful of these three tools.

Early Closure

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Early closure allows you to get out of a binary options trade before the trade expires in return for a partial win or loss. Keep in mind that some brokers limit when you can use early closure; they may only let you use it in the money or out of the money. So be sure to check so you understand how your own broker allows you to use this tool.

The value of early closure cannot be overstated here. Imagine you are in a winning trade, but you expect the trend to reverse. You can use early closure to get out before the trade goes against you. A partial win is better than a loss. Or imagine you are already in a losing trade, and you now know that there is no way the trade is going to go in your favor. Early closure can help you to curb your losses. A partial loss is better than a full loss!

This is the only tool on this list that does not increase your risk exposure, and that is significant! The other tools here all force you to assume added risk in the hope of forestalling disaster. Early closure is the most conservative strategy for managing your open trades when things are not going as you expect. That does not mean it is always the best choice, but more often than not, you will likely find that it is. On the whole, that makes early closure the most useful tool listed here. If you were trying to decide between a broker which offered early closure and one which offered double up and rollover, you would be better served by the first.

Making the Best Use of Early Closure, Double Up, and Rollover

Let’s consider an example of a situation you could find yourself in where you might have to decide between one of these tools to manage your trade. Going back to our example with GBP/JPY, let’s say you clicked “Buy” and your trade has 20 minutes to go before the expiry time. Your trade is currently at a loss. What should you do?

You have three options:

1. You could remain in your trade and not do a thing, waiting patiently for it to expire.
2. You could use rollover in the hopes that the trade will come back to a winning position given enough additional time.
3. You could close out early at a partial loss.

If you have evaluated these options, you have noticed that each carries pros and cons. If you choose the first option, you could win or lose your full investment depending on what happens. If you choose the second option, you may give yourself a better chance of winning, but your loss will be greater if the trade does not turn around. If you close out early, you do lose, but at least you do not lose the full investment.

To know which to choose, you have to know why the market is behaving the way it is. One good rule is to ask yourself whether the basis for the trade still exists. If the answer is “yes,” it may be logical to remain in the trade or even use rollover. If the answer is “no,” use early closure and get out.

Here is another example. Let’s say that you hit “Buy” on GBP/JPY again, and this time you are winning. The expiry time is 15 minutes away. Here are your options:

1. You could remain in your trade and not do a thing, waiting patiently for it to expire.
2. You could use rollover (if available) in the hopes that the trade will continue to be a winner given a longer expiry time. This would give you an added 30%.
3. You could use double up if you are confident that the strong up trend will continue from your current price level.
4. You could use early close and get out at a partial profit.

Which makes the most sense? In most cases, the first choice is probably the best, but options 2 and 3 may make sense given the right situation and enough confidence. Rollover would be smarter and more conservative than double up, but this is precisely why most brokers will not let you do it if you are in the money. When would you use early closure? You would use early closure while winning if you saw signs that the market was about to turn against you. Again, a partial profit is better than a loss.

Ultimately it is up to you to test each of these tools with your binary options strategies. That is the only way to know how they will perform, and you need to do it in real time to really get a feel for it. So demo test and record your results. Take careful notes about the situations which prompted you to use double up, rollover or early closure, and the results. What would have happened if you had done something different, or done nothing at all? Did the tool help you save money or make money? Did it cost you?

Eventually you will be able to establish patterns, and these will help you figure out how to make the best use of double up, rollover, and early closure in your binary options trading. While you are shopping for binary options brokers, look for a broker that offers all three. If you do have to pick and choose, though, remember that early closure is the best tool for controlling your risk!

What Are Binary Options?

Binary options are simple fixed reward contracts.. A trader receives either a fixed profit or fixed loss. Binary options offer the traders a simple “One or the other choice”. They are designed to be very simple to trade.

Binary options have two possible outcomes, e.g “Up or Down”. The fact that there are only two outcomes possible is why they are called “binary”. Binary trading is extremely hot right now due to how easy it is for anyone to do it. Binaries are the future of online trading.

Binary Options Offer A “One Or The Other” Choice

The most simple binary trade is an up or down binary option.

Do you think the price of something (gold for example) is going to be higher or lower in 1 hour? If you think higher you “call” and if you think lower you “put”. You either win your trade and get your return (up to 90% in some trades) or lose the amount risked up front. One hour later your binary trade reaches the expiration time. At this time you are either in the money or out of the money.

It is that simple – Binary Options Trading is designed to be easy to trade for everyone!

Example – Trading Google Stock With an Up / Down Binary

Let’s look at an example of a simple cash-or-nothing binary trade so you can understand how they work. Let’s say you want to trade Googles stock price.

Here the trader has a choice of up or down (call or put). Choose Correct & You Win

You believe that Googles stock is going up, and that it will be trading at or above $670.39 as of a 4:00pm EST today.

You decide to make a trade based on that belief. Since you think the price is going up, you place a ‘Call’ binary trade. You risk a $200 on this trade. This the total amount of money you are risking. You can not lose more than $200. The best part about binary options is that your risk and return are fixed and known up front. You can never lose more money than your trade amount. Your return is known up front so you know exactly how much money you will make if you win.

Enter Your Payout Amount & Your Return Is Clearly Shown – Hit “Apply” To Execute The Trade

In this example, your payoff is an 70% return if we finish in the money. There is a 10% return, or rebate, if we lose. We are going to risk $200. 70% of $200 = $140.

If we win, our payout is $340.

We get our $200 back plus $140 more for a total payout of $340. Most binary brokers usually offer between 70-90% payouts, at least the good binary trading sites trusted by traders today offer these kind of returns.

If we lose, our payout is $20.

We get a 10% rebate on our risked amount. 10% of $200 = $20 ‘out of the money return’.

So, to recap. If you win you get your fixed return of $340. IF you lose you lose your initial trade amount of $200, but get a 10% rebate of $20. Making it a net loss of $180.

The price you are betting Googles stock will close above, $670.39, is called the ‘Strike Price’. The date and time you chose as part of your trade are called the expiration date or maturity date.

If the price finishes above $670.39 you win the trade. If it finishes below $670.39 you lose the trade. In the money or out of the money. The trade is done and your payout is made to your account virtually instantly.

That is it. It is that simple.

It does not matter how much Google closed above $670.39 It just matters that it closed above that price. Your payout is the same regardless of how far an underlying assets price moves. That is one reason so many people absolutely love trading binaries. You just pick from a one or the other choice and hold on for the ride.

This example is the most common type of binary option traded today. It is an up/down option and known in the industry as a cash or nothing trade. You make the cash or you get nothing.

There are more types or styles of binary trades available. They all offer a one or the other choice and a fixed risk/return. Let’s take a look.

Binary Options – Types & Classifications

On this section, we’ll describe the most common binary option trades. You’ll learn how traders are using them to carve out profits of up to 80 percent or more (sometimes, much more). Along the way, it helps to keep in mind that “binary” means “one or the other.” This concept is applied consistently in the various types of binary options you’ll encounter. Lastly, we’ll provide a short list of reputable binary options brokers that offer access to the instrument types you’ll learn about below.

There are a number of different classifications of binary options trades. All of these trades have that basic definition in common, but differ based on a number of elements including the type of payout and the conditions of the trade. These days the newest trend and online trading is binary options. Many companies online promise you can make a lot of money trading binary options, but what are they?

Binary options are trades you can make which have a fixed risk and reward. You can also look at them as another way of trading an underlying financial instrument, since you can trade stocks, currencies, commodities, and other assets as binary options.

The term “binary options” refers to the way you’re trading the underlying asset.

Let’s take a closer look at Binary Options Types.

  • Calls vs Puts – Refers to whether you choose Up or Down – the most common type.
  • Touch or No Touch – Refers to whether you think the price will touch or not touch a certain point
  • Double Touch / Double No Touch – Like the other but has two points to contend with
  • Range Options – Boundary Trading or Tunnel Betting – Refers to whether you think the price will finish in or out of a price range

Although binary trading has exploded in popularity over the past couple of years, many active options traders are unfamiliar with them. This exciting, new area of trading is winning converts each day. Traders know in advance how much they stand to lose, and how large a return they’ll see if their options expire in the money. In addition, they have several types of binary options at their fingertips, giving them a variety of ways to implement their trading strategy.

Call vs Put – High/Low Binary Options – Up Or Down

These are likely the most popular of all binary options as they are the easiest to understand, and therefore trade. Call and put options are commonly grouped under the category of ‘cash or nothing’ binary options simply because at the end of the set time period, the investor will either receive a cash payout or nothing.

Call Or Put – Up or Down – High Or Low

Calls Vs. Puts – Up Or Down
Call options are also known as digital options and are a relatively simple form of binary option. A buyer will choose to purchase a binary call option when he or she believes that the asset price will rise over a period of time. In order for a call option to be successful, the asset price must rise above the price that the asset was at when the buyer placed their bid. This is known as the strike price.

A put option is the exact opposite. Instead the buyer is predicting that the asset price will drop below the strike price at the time when the option expires. If this occurs, the buyer receives the full cash payout offered by the option.

These instruments are referred to by a few names, including up/down, call/put, and of course, high/low binary options. Most consider them to be the simplest of all binary options types. They are essentially a bet on whether an asset’s price is going to move up or down. You’ll find this type of instrument at nearly every top binary options broker.

For clarity, a call is simply a contract in which one party agrees to sell its ownership stake in an asset at a certain price to another party. If the price of the asset increases, the second party (i.e. the buyer of the contract) profits. A put is a similar type of contract. The difference is that the buyer of the contract profits if the price of the asset falls.

Boundary Or Range Options

These instruments involve price ranges, or boundaries. If you correctly guess whether the price of the underlying asset will fall within a particular range, or float outside of it, you’ll receive the posted return on your investment. If you guess incorrectly, you’ll lose your investment (excluding a rebate, if the broker offers one).

Range Trading – Boundary Betting – Tunnel Trades

Range Options
Known as tunnel bets and boundary betting, range options work by choosing whether a price expires within a particular price range. I think the range options have the most types of synonyms. They are also known as in and out options because you are either betting in the range or outside of the range.
Range options are less common than high/low binary options. They present a higher risk of loss, but also offer a higher return. It’s not uncommon for potential returns on boundary options to climb to 300% and above.

Touch/No Touch Binary Options

With these instruments, profit and loss are determined by your ability to guess whether an asset’s price will reach, or “touch,” a specific price. If the price touches the target price, and you guessed it would do so, the trade closes and you receive your expected return. Otherwise, the trade remains open until it expires out of the money.

Touch Option Trading – If the price hits the light gray area, you win!

Touch or No Touch Options
This style of binary option is simple and popular. They work by having a certain trigger price point. If you believe the assets price will hit that price point in a certain time frame you have to bet on the touch. If the price touches that trigger then the trader wins and the trade is over. If the trader bets against the price touching a certain point then the opposite is true.

If you choose a “no touch” trade, and the asset’s price touches the barrier, the trade closes immediately at a loss. If you had chosen ‘touch’ trade and the price barrier was hit it would result in a win immediately.

Double Touch / Double No Touch Options

These binary options work on the premise as touch/no touch instruments. The difference is that two price barriers are used rather than only one. The two prices form high and low points between which the asset’s price fluctuates. Profit and loss are determined by your ability to guess whether the price will “touch” either barrier.

If you select a “double touch” trade, you’ll receive a payout if the asset reaches or breaches either target price. If you select a “no double touch” option, you’ll receive a payout if the price remains between the barrier, touching neither of them.

Classification via Payout Type

There are two different types of binary options trades as classified according to the payout. Cash or nothing is a trade in which the participant either receives a fixed amount of cash for winning or nothing for losing. Keep in mind that “receives nothing” doesn’t fully describe the consequences of a loss. The trader generally forfeits the entire risked amount, however some brokers have rebates on losses.

Asset or nothing is just like the cash or nothing type, except that the trade pays out the value of the underlying financial instrument instead of cash. These types of binary options are not as prevalent as the very popular cash or nothing style of options.

Another way of classifying trades is to refer to American-style or European-style trades. In American-style trades, the options can be exercised as soon as the underlying asset hits the strike price—meaning you don’t have to wait through the entire expiration or maturity period. With European-style trades, you don’t win anything if the asset doesn’t hit the strike price (or trade above or below it as you wagered) at the expiration time. That means if the strike price is hit before the maturity date is reached and then the trade goes back against you, you lose. In other words, this type of trade is more specific where timing is concerned.

Many people classify binary options by the type of trade that is happening.

Cash Or Nothing Binary Options

There are two types of instruments: those that pay cash and those that pay in the form of the underlying asset (assuming the trade expires in the money). The instruments you’ll find at the binary options brokers we recommend represent the former, called cash or nothing binary options.

Cash Or Nothing Options
Cash or nothing binary options refer to the fact that you either finish the trade in the money our out of the money. You either won money or lost your money. The real cash or nothing binary options are set up this exact way, with a fixed return if you win and a loss of your trade amount risked if you lose. A few limited brokers offer rebates on losses (AnyOption offers 15% rebates) so the cash or nothing name is not 100% accurate.

This means you’ll receive a percentage of your investment if you correctly guess the movement of the instrument’s underlying asset, or its price when the instrument expires. If you guess incorrectly, you’ll lose your investment.

Most binary options types are based on this “cash or nothing” premise. The percentage return the trader receives if the instrument expires in the money is posted by the trade. It is known before the trade is executed. This a major advantage over other types of trading where the amount of potential profit or loss is unknown.

Cash Or Nothing With Rebates

This is a variation of the conventional cash or nothing instrument. A lot of binary options brokers offer rebates to traders whose options expire out of the money. In most cases, the rebates range between 5% and 15% of the amount invested. For example, if you invest $100 in a trade that expires out of the money, and the broker offers a 15% rebate, you would only lose $85. Not all brokers offer rebates. Those that do not offer them usually extend other perks, such as higher returns for trades that expire in the money.

Cash Or Nothing With Buy-Out Clause

Some binary options brokers offer a feature that allows you to close your trade within minutes of executing it. This is a handy option if you suspect you guessed incorrectly regarding the price movement of the option’s underlying asset. By exiting the trade early, you are able to limit your losses.

You can also use this feature to lock in early profits on a trade. Suppose you guess correctly about the asset’s price movement, but suspect it may head in the opposite direction prior to the instrument’s expiration. Closing the trade early helps you to realize early profits, and avoid forfeiting them if the asset turns.

Examples of this buy-out clause include 24Option.com’s “Early Closure” feature and AnyOption.com’s “Take Profit” feature.

Asset or Nothing Binary Options

If you traded an asset or nothing binary option on the stock, instead of receiving the amount of cash you wagered, you’d instead receive that same value in stock in the company. There are many different variations on binary options trades—you may bet that a certain price won’t be touched, for example. You can even specify multiple prices you believe will or will not be reached in a given time period. The rules which govern binary options trades vary depending on where you’re trading. The different rules concerning expiration dates are referred to as European- or American-style trading.

Ready To Start Your First Binary Options Trade?

Now you know the basics you’re ready to start learning more with our binary trading guide! You’re not ready to start trading yet. To trade profitably, you’re going to need to come up with a reliable, consistent methods for winning your binary options trades. That means there is still plenty of research, testing and demo account trading. If you can come up with a consistently profitable method and put it into practice, you could potentially trade binary options for a living.

Top Binary Options Brokers With Different Options Types

The types of binary options offered by various brokers may have little influence on which brokers you ultimately work with. A lot depends on whether you intend to execute the instrument types described on this page. A majority of traders stick closely to high/low binary options, all but ignoring other types of trades. Some, however, are willing to execute high-yield instruments, such as boundary binary options. Below, we’ll tell you which brokers offer which instruments, along with other features and perks.

If you’re new to trading binary options, we encourage you to learn the ropes with up/down instruments before venturing into higher-yield options. You’ll find them at each of the four sites we recommend above.

ECN Forex Brokers – 2020

ECN brokers (Electronic Communication Network brokers) are among the fastest emerging brokerages in the Forex world, and there’s no question that new ECN brokers are opening their doors regularly. In short, ECN Forex brokers provide a marketplace where traders and market makers can place competing bids against each other. Minimum deposits for ECN accounts are often higher than they are with standard Forex accounts, but there are several significant advantages offered by the best ECN brokers, such as the ability for scalping and lower spreads.

With so many attractive options to choose from, choosing between different ECN trading options can be surprisingly difficult. Compounding the decision is the fact that many traditional brokers offer ECN accounts in addition to their standard trading accounts, which widens your pool of options.

To make your decision easier, we’ve compared critical aspects of some of the top ECN brokers to give you a starting point in your search for the best ECN Forex broker.

ECN trading with leverage up to 1:500

Deposit $500 and trade with $1000!

MetaTrader 4, MetaTrader 5, IRESS

ECN trading with leverage up to 1:500

Great ECN execution on MT4 platform

MetaTrader 4, MetaTrader 5, cTrader

Great ECN execution on MT4 platform

Best all-around: high floating leverage + fast execution

30% Welcome Bonus

MetaTrader 4, MetaTrader 5

Best all-around: high floating leverage + fast execution

Tight spreads with scalping available

100% Double Up Bonus

MetaTrader 4, Other

CySEC, MiFID, FCA, ICF

Tight spreads with scalping available

More info about ECN Forex Brokers

. So what is an ECN Broker?

Click on image to enlarge

Recent years have seen many new Forex brokers open their doors as ECN brokers. ECN stands for “electronic communications network” and sometimes brokers of this type are also referred to as “STP brokers” (STP stands for “straight through processing”) or “no dealing desk” (NDD) brokers. All these terms mean approximately the same thing: clients’ trades are executed by matching them with other clients or 3rd party counterparties who wish to take the other sides of the trades. Non-ECN brokers, in contrast, take the other side of the trade themselves, creating a large and obvious conflict of interest with their clients. They are typically referred to as “dealing desk brokers” or “market makers”.

ECN brokers typically charge lower spreads than market makers, which they compensate for at least partially by charging additional commissions on trade entries and exits which is calculated as a fixed percentage of the total value of the trade. Despite these fees, the combination of spread and commission is usually at least a little lower than the spread charged on a similar trade by non-ECN brokers.

It is this combination of lack of conflict of interest plus the typically low cost of trading that makes ECN brokers so attractive to traders, but there are some other factors worth considering before you decide that an ECN broker, or an ECN account (some brokers offer both ECN and dealing desk type accounts) is for you.

Account size – ECN brokers usually require higher minimum deposits. A few insist on minimum trade sizes as high as 1 minilot instead of the 1 microlot (one tenth of a minilot) that has become more standard within the Forex industry.

Execution – ECN brokers typically offer excellent execution speed and sometimes spreads are even non-existent or inverted for a second or two. Note that during periods of very low liquidity execution may be seriously delayed as there is no market maker to take the trade if no client wants it. This can lead to seriously negative slippage events or being stuck in a bad trade a little longer than you would be if trading with a market making broker. These events often tend to occur at major news releases especially when the result differs from the market’s consensus expectation.

Spreads – these are usually an attractive feature, even when commission is considered. However, spreads can widen dramatically and can sometimes be beyond what market maker brokers will be offering at the same time. Spreads will of course vary a lot as they are based more precisely upon market supply and demand. Fixed spreads are only available through market making brokers. They are rarely worth it economically, as it happens, but that is another story.

Choice of Instruments – as ECN brokers need to be sure they are truly plugged into a market’s liquidity before they can credibly offer trading in that market instrument, market making brokers are often better situated to offer a wider choice of instruments, especially in individual stocks and shares, commodities, and various types of indices. Additionally, ECN brokers tend to require higher minimum trade sizes in these kinds of non-Forex instruments. This means that if you want to be very diversified, you might have another reason to consider using a market making broker in addition to or as an alternative to an ECN broker.

Maximum Trade Size – ECN brokers usually offer much higher maximum trade sizes, as they (at least theoretically) do not have to worry about processing any order through a dealing desk. For example, some dealing desk brokers won’t let you buy or sell more than 5 lots at once. ECN brokers, if they specify maximums, tend to place them at much higher levels.

Minimum Trade Size – ECN brokers used to commonly require higher minimum trade sizes of 1 minilot (0.1 full lots), compared to the 1 microlot (0.01 full lots) that was typically required by dealing desk brokers. Although an increasing number of ECB brokers do now allow trading in microlot sizes, a few still do not, so it could be an issue if you prefer to trade in microlots.

Who are the “Real” ECN Forex Brokers?

We’ve seen the reasons above why ECN Forex brokers are increasingly popular. We’ve noted that more and more brokers are advertising themselves as ECN brokers, or at least offering ECN-type accounts. There is a lot of controversy around the question of whether many of these brokers are “real” ECN brokers. So, what is a “real” ECN broker, and how can you tell when one is telling the truth?

A true ECN broker is simply defined as a broker that plugs your orders into a network where it is automatically matched to a matching order from another client or liquidity provider. This is the textbook definition to work from. Most brokers claiming to be ECN brokers are probably telling the truth about this at least, although if you see large spreads, spreads that never seem to really vary, or continuously slow execution, they are almost certainly not.

The more sophisticated problem arises when we ask what qualifies as a “liquidity provider”? If it is just another dealing desk, then how can it be a “true” ECN offering? The network is only as good as its source. To be regarded as a real ECN broker, the liquidity provider should really be a tier 1 bank. We must wonder how often this is really the case, and why many brokers that advertise themselves as ECN brokers are so tight-lipped about which liquidity providers they use!

When the first ECN brokers started appearing, bank traders started to ask how orders for minilots (let alone microlots) could possibly be sent straight through to tier 1 banks for processing. Bank traders will tell you that at this level, trade sizes are usually in minimums of ten or so full lots. This suggests that an ECN broker offering smaller minimum trade sizes must inevitably perform a “bucketing” of orders, and that would require a kind of dealing desk to process and allocate the bucketing.

The final question is, does it really matter? If a broker is at least trying to match orders directly, there is not much of a conflict of interest, potential or otherwise. If you benefit from a low cost of trading and relatively fast execution, then why not be happy with what you have got. Just don’t be under any illusions as to what is probably going on behind the scenes.

How to Choose the Best ECN Forex Broker?

Choosing an ECN broker is not very different from choosing any broker. There are not many special factors to watch out for at ECN brokers that differ from what should be the usual considerations.

When choosing any Forex broker, you should start from how much money you want to deposit, what kind of instruments you want to trade, how often you want to trade, and where you are located. Beginning with these three factors, you should be able to eliminate several brokers from your list of candidates. The good news is that brokers that don’t meet minimum standards of acceptability in one area are usually the same ones that won’t meet required standards in other areas also, so it becomes easier to eliminate them.

Starting with location, you might feel more comfortable with a broker located in your own country (or a nearby country), or is in a country that speaks the same language as your or which has a similar legal system. If you are a U.S. resident, you have special issues to consider as the U.S. is quite restrictive in Forex trading and if you must be onshore you have little choice, but it makes your choice easier. If you live in the United Kingdom, you might want a U.K.-based broker that offers spread betting format for tax reasons so you won’t have to pay any tax on any winnings. This is probably the easiest place to start and helps you narrow down the list considerably right away when choosing a Forex broker.

The next step to consider is regulation and the safety of your deposit. This might not matter so much to you if you only intend to deposit a relatively small amount of money that is not very important to you. If not, though, this is a very big issue. Some countries have a well-developed culture of financial regulation enforcement, which is always reassuring, and are just not places where the big fraudsters can thrive. Another big issue to consider is whether any protection is offered on your deposit. For example, at the time of writing, the United Kingdom government protects everyone’s deposit with any regulated broker up to a maximum amount of GBP 75,000. This means that if you deposit that amount or less with a broker regulated by and based in the United Kingdom, if they steal from you or cheat you or even just go bankrupt, you should eventually receive your deposit back from the government there. This is a significant advantage, and provides a lot of reassurance. If your deposit is a significant sum, you should seriously question whether it is wise to deposit it anywhere that does not offer government-backed deposit protection. You also should be biased towards reputable financial centers and away from tiny islands you never heard of before!

The third factor to think about is the cost of trading. These days, there is no reason why anyone with a significant amount to deposit should put up with a total spread and commission equaling more than 1 pip on the benchmark EUR/USD Forex currency pair. One way to compare spreads is to open demo accounts at each of your candidate brokers to see what their spreads really are. One potential problem with this strategy, however, is that brokers have been known to make conditions in their demo accounts, including spreads, significantly better than those which prevail in their real money accounts. Fortunately, there are a few websites which compare the spreads of real money accounts in real time across a range of different brokers, so looking here is going to be a good idea.

Another serious factor to consider in choosing a broker is your style or intended style of trading i.e. how many trades you usually make. Are you or are you going to be a scalper, day trader, swing trader or position trader? If you are making few trades but leaving your positions open for several days or even over weeks and months, you should consider how competitive are brokers are in terms of their overnight financing rates which are generally charged each day against positions left open at 5pm New York time. For position traders, these rates can make more difference to overall profit and loss than the spreads charged, at least up to a point. However, if you are going to be leaving trades open for only minutes or hours but making many more trades, the spreads become a more influential factor, and overnight financing may not be an issue at all. This means that of two Forex brokers, one might be the most economical choice for you as an intraday trader, but not as a longer-term trader holding positions overnight.

The next thing to consider is the broker’s trading platform. Does it work smoothly, or does it have problems freezing up? It is easy, intuitive and pleasant to use, or not? Does the execution work in a manner that suggests the Forex broker is a true ECN broker or something close to it?

Finally, you can think about the issues that brokers’ advertising likes to focus on, but which are really the lowest of your concerns. Bonuses and other beneficial promotions could be interesting, but check the small print: accepting a bonus, deposit or otherwise, can mean you will be unable to withdraw a certain amount of your deposit until you have made a minimum number of trades.

One good think about choosing ECN brokers is that they tend to aim at a more sophisticated market than market-making brokers, meaning that you probably will not have to worry about misleading terms or hard sells. The most professional brokers of all sometimes have poor advertising and customer service, but they may be offering you the best ECN brokerage deal possible.

Additional Reading

Thinking of switching from a traditional broker to an ECN Forex broker? Discover the differences between market makers (aka standard Forex brokers) and ECN brokers, and determine which one can meet your current trading needs. Read more.

ECN brokers require higher trade volumes than most other Forex brokers, but they do allow scalping and excellent spreads. Read on to learn if an ECN Forex broker is right for you. Read more.

Looking to enjoy the benefits of ECN Forex trading with the convenience of the MetaTrader 4 platform? This article explores the advantages and disadvantages of the MT4 ECN Forex platform. Read more.

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