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ECN and Commission? Is it worth it?

  • Post #1
  • Quote
  • First Post: Oct 16, 2011 3:55am Oct 16, 2011 3:55am
Hi,
I've been looking ECN brokers like ATC with very very low spreads but for each trade we need to pay a commision like : $0.49/10K lot...Is it worth it?

Would you trade by paying a commision to trade from an ECN? or trade from a regular for NO commision?

What is ECN anyways?
STP is what you need FXCM for example is an STP,
To answer this question fr yourself, you need to start thinking about how much a fixed spread costs you in comparison to what a floating spread can cost you coupled with the commission.

For example, with a fixed spread, it's easy to calculate that for a 10,000 unit trade on the EUR/USD will cost you $1 per pip right? If the spread is always 2 pips, (A rather decent fixed spread) it will always cost you a total of $2 to open and later, close that trade. With variable set ups on STP processors like FXCM, you may get a commission free spread on some pairs as low as 1 pip but also see the spread jump higher at times of low liquidity or who knows. All I'm saying is that here, you have to simply figure out what the spread is costing you.

In comparison, a commission for each trade can save you loads on the spread but add to the cost as well of course. Again, thinking of 10,000 unit trades, we'll figure it out for the EUR/USD pair.

My broker charges $7 per lot per round turn so a 10,000 unit trade on the EUR/USD will cost $0.70 cents from start to finish, ($.35 to open the trade and $0.35 to close it) plus the cost of the spread. At times, I have seen zero spread on my broker's feed but generally, I would peg it at about a 0.5 average spread, often providing me with trades that execute on a 0.3 spread amount. On a 10,000 unit trade, the spread then costs me $0.50 for a 0.5 spread and the commission another $0.70 for a total of $1.20 to trade 10,000 units.

So, for fixed spread, the trade is
Spread=cost
For commissioned brokers, the trade is
spread+commission=cost

None of this of course takes slippage into account which is another whole ball of wax.
Quoting kapa_89
Hi,
I've been looking ECN brokers like ATC with very very low spreads but for each trade we need to pay a commision like : $0.49/10K lot...Is it worth it?

Would you trade by paying a commision to trade from an ECN? or trade from a regular for NO commision?

What is ECN anyways?
You can find more info on this here.
Mind the gap
With ECN trading, you get interbank quotes, low spreads and variable ones. It boils down to what your preferences are. And yes, it is easier to calculate pips with fixed..
At the moment, I use tradersway and a couple of other ECN brokerages, with both fixed and variable spreads. You may want to review all the info online, decide what you want to do next and make the call!
I am curious about how do scalper earn money if the target is just few pips, but commission is higher than earn? Or the earning can only be made by using high leverage in his case?
Quoting kapa_89
Hi, I've been looking ECN brokers like ATC with very very low spreads but for each trade we need to pay a commision like : $0.49/10K lot...Is it worth it? Would you trade by paying a commision to trade from an ECN? or trade from a regular for NO commision? What is ECN anyways?
Thing is, very few people understand what ECN excactly is.

ECN stands for Electronic Communication Network. What it means is that if you place an order, it will be visible in the orderbook. LMAX for example is a true ECN Network:


http://s11.postimg.org/voknru9pv/ECN.png

If you enter an order into the Network, it will be visible on LMAX Homepage. you can test this during quite times, enter an order of for example 2 lots at a certain Price, and it will be immetiately visible. Then, other Traders can send a market order against your Limit order. That's what ECN is.
Forex is a losers game.
Quoting kapa_89
Hi, I've been looking ECN brokers like ATC with very very low spreads but for each trade we need to pay a commision like : $0.49/10K lot...Is it worth it? Would you trade by paying a commision to trade from an ECN? or trade from a regular for NO commision? What is ECN anyways?
Hi Kapa,

do you use market orders or pending orders and do you trade frequently?
Guys! This thread is dead. End of year 2011. Please check.

I am just using this thread to ask my stupid question. Appreciate that if you could help.

My Question:
I am curious about how do scalper earn money if the target is just few pips, but commission is higher than earn? Or the earning can only be made by using high leverage in his case?
Quoting ~bull.bear~
Guys! This thread is dead. End of year 2011. Please check. I am just using this thread to ask my stupid question. Appreciate that if you could help. My Question: I am curious about how do scalper earn money if the target is just few pips, but commission is higher than earn? Or the earning can only be made by using high leverage in his case?
ofc a scalper would earn back the commissions, their profit target will be higher than the commissions. for example, if the commission is $7 rtsl, then when they place a standard lot order for a pair such as eurusd, each pip is worth $10 so $7 is 0.7 pips. their profit target will be over 0.7 pips in account for the commission and then whatever the spread may be (bid/ ask price depending on which one is used to close out the trade).
Quoting trader121
{quote} Thing is, very few people understand what ECN excactly is. ECN stands for Electronic Communication Network. What it means is that if you place an order, it will be visible in the orderbook. LMAX for example is a true ECN Network: {image} If you enter an order into the Network, it will be visible on LMAX Homepage. you can test this during quite times, enter an order of for example 2 lots at a certain Price, and it will be immetiately visible. Then, other Traders can send a market order against your Limit order. That's what ECN is.

hi Trader121,

Just a question if you please. Those order sizes, are they in millions or 100K, ie top line is 60m at that price?

Regards,
K.
depends on the market condition. a fixed spread market maker with a 4 pip spread on major pairs may be cheaper than an ECN when the spread is is spiking and widening and to make matter worse, the trader has to accommodate for the commission.
Quoting kermut
{quote} hi Trader121, Just a question if you please. Those order sizes, are they in millions or 100K, ie top line is 60m at that price? Regards, K.
1 unit in this graph is 10k, that means 10'000 notional. That means:

1 = 10'000 notional = 1$ per pip = 0.1 Units in Metatrader
10 = 100'000 notional = 10$ per pip = 1 Unit in Metatrader
100 = 1'000'000 notional = 100$ per pip = 10 Units in Metatrader
1000 = 10'000'000 notional = 1000$ per pip = 100 Units in Metatrader
Forex is a losers game.
Quoting trader121
{quote} 1 unit in this graph is 10k, that means 10'000 notional. That means: 1 = 10'000 notional = 1$ per pip = 0.1 Units in Metatrader 10 = 100'000 notional = 10$ per pip = 1 Unit in Metatrader 100 = 1'000'000 notional = 100$ per pip = 10 Units in Metatrader 1000 = 10'000'000 notional = 1000$ per pip = 100 Units in Metatrader

Thank you for clarifying that. Basically, bid is 0.6m and ask is 1.3m. Not really that good liquidity if you look at the next bid is nearly 0.3pips away with 4.9m. Then again, could have been the market conditions at the time.

Regards,
K.
  • Post #15
  • Quote
  • Last Post: Jul 30, 2013 7:34am Jul 30, 2013 7:34am
All i know is that the ECN brokers have very low spread so that the profit making is really faster in comparison to other broker types which has more spreads like the market makers.
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