Introduction to cTrader and ECN
Hello Traders. Welcome to the cTrader tutorial and the first module, Introduction to the cTrader Platform. In this lesson, well, we’re going to introduce the cTrader platform, and we are going to talk about what an ECN broker is, and why it’s best for you to decide to trade on the cTrader platform if you’re trading Forex. Now, let’s start by defining what an ECN platform is. And the cTrader is an ECN platform on which ECN stands for Electronic Communication Network. An ECN broker links smaller market participants like you and me with tier 1 liquidity providers, and the tier 1 liquidity providers are the big banks that have most of the liquidity in the Forex market.
This means that at one end we have you as a trader trying to get filled on your one lot, by sending the orders through your broker. Now, this is what used to happen before. You used to send the order for one lot on the euro/U.S. dollar to your broker and you would get filled by your broker, and your broker will act as a market maker, taking the opposite side of the trade from you. This is not what happens with an ECN platform. Your broker, instead of filling it itself and act as a market maker, will pair your order with the best price from tier 1 liquidity providers, which are the major banks, and this is great, because your broker is not taking the opposite position, which means that it’s not trading against you.
Your broker with an ECN platform acts just as a highway between your orders and the big liquidity pools. Now, let’s talk about the advantages of trading with an ECN platform. Well, when you trade with an ECN platform such as the cTrader, all activity is completely anonymous. And by being completely anonymous on the market, this enables you to trade on neutral prices which reflect the real market conditions. Also, ECN platforms have instantaneous execution, which means zero slippage on your trades.
Now, this is very important for you traders out there that…well, and most important for scalpers and day traders, because these kinds of traders have to react quickly to the market once they have their set-up in front of their eyes. So, by trading through an ECN platform, they are going to have instantaneous execution with zero slippage. Now, another great advantage of trading with an ECN platform is that you have client-to-bank trading and not client-to-broker trading, and I need you to understand the difference between these two kinds of order execution.
When you have client-to-bank trading through an ECN platform, your broker will only match you with the liquidity pools. And if you are trading with a market maker, which most of the Forex brokers are, your broker is going to fill your order itself and trade against you. This means that when you lose money, your broker makes money. But with an ECN platform, your broker only makes money through commissions and spreads. And talking about spreads, you have tighter spreads with an ECN platform, which means that your trading costs are going to be lower, which means that your overall profits are going to be higher just by lowering your trading costs.
Now, this is basically what the cTrader platform is going to do for you, and we thought that it was very important for you to understand what the platform is trying to do for you as a trader, and the advantages of trading Forex through the cTrader platform before going actually on how to operate it.