Please suggest me a good book in these areas:
and How does a broker work?
Forum on trading, automated trading systems and testing trading strategies
Something Interesting in Financial Video August 2013
Sergey Golubev, 2013.08.25 15:16
Sergey Golubev, 2013.07.01 06:59
Just something about ECN and STP - The Truth about Currenex Brokers :
What is an ECN?
ECN is a term often used when referring to Currenex. ECN stands for
Electronic Communication Network and it eliminates the function of a
third party in the execution of orders. Without the intercession of a
third party, market participants of any size can interact directly for
Bid and Offer prices posted by other market participants. This leads to
greater transparency and narrower spreads. ARCHIPELAGO, purchased by
the NYSE in 2006, and ISLAND are two well known ECNs.
What is an ESP?
ESP™ means Executable Streaming Prices and is offered through the
Currenex system. Currenex connects to multiple sources of liquidity,
primarily banks, who offer "pools of liquidity". This expansiveness
from the multiple pools of liquidity, available through Currenex’s ESP,
provides better price discovery and narrower spreads for traders.
The prices that are offered via Currenex are executed directly within
these various pools of liquidity. Whereas in the past, a trader would
be required to obtain a Prime Brokerage relationship with one or more of
the major liquidity providers which required a very high threshold and
associated high expenses.
Not all Currenex Brokers are the same.
It is important to remember that a broker’s Currenex offering is only as
good as the liquidity sources that are linked to the platform. The
quantity and quality of liquidity sources can lead to dramatic
differences in price spreads. For instance, a broker offering 1-2 banks
versus a broker offering 8-10 banks will have a dramatic difference in
pricing and liquidity.
What is STP?
STP, or Straight Through Processing, is a term commonly used among Forex
brokers.Many Forex brokers state they use "interbank pricing" but act
as a counter party to their customers’ trades. They take the other side
of the trade, going against the client’s best interest, and make money
on a client’s losing trade.
Conversely, a true STP setup passes the order in an automated way to all
liquidity sources. With a true STP broker, there is not the
possibility of any adversarial relationship between the broker and
client as the broker only generates revenue in the form of a commission
per trade rather than the dealing desk model of capturing client losses.
Something Interesting in Financial Video October 2014
Sergey Golubev, 2014.10.17 20:03
Difference between ECN, market makers and STP brokers
In a perfect world the cost of buying and selling currencies would be
the same, no matter which Forex broker you use. Unlike the stock market
where we get heavy regulation and where stock prices are derived from a
single exchange, prices vary from different Forex broker platforms. The
reason why is because currency prices are derived from the Interbank
market which is a conglomerate of banks and hedge funds that provide
prices to various Forex brokers around the world. The better the
relationship between the Interbank market participants and the broker
means that the prices are cheaper.
We expand on this in the video
tutorial whilst also describing the main difference between ECN, market
makers and STP Forex brokers.
Sergey Golubev, 2013.08.24 08:28
Sergey Golubev, 2013.08.26 08:40
A lesson on how the central banks of the world participate in the
foreign exchange market and move the forex market up and down for their
Sergey Golubev, 2013.08.26 15:50
3. Individual speculators who actively trade currencies trying to profit
from the fluctuation of one currency against another. This is as we
discussed in our last lesson a relatively new phenomenon but most likely
the reason why you are watching this video and therefore a growing one.
Something Interesting in Financial Video October 2013
Sergey Golubev, 2013.10.10 14:44
This video provides an introduction to electronic communications
networks (ECNs), systems that allow buyers and sellers of stocks to
trade directly without an intermediary.
Most forex traders
participate in the forex market with forex brokers. There are mainly two
types of forex brokers: market makers and electronic communications
networks (ECNs). In this article we want to introduce the latter type of
brokers, the ecn forex broker.
What is an ECN forex broker?
ECN forex broker is a financial expert that provides the clients with
direct access to other forex participants in the currency market by
using electronic communications networks (ECNs). Unlike market makers,
which always trade against their clients to make profit, an ECN forex
broker only creates opportunities of trading between forex traders.
How does an ECN forex broker work?
forex brokers provide a medium by passing on the prices for different
market participants such as banks, market makers and other traders in
the market. Then the best bid/ask quotes will be displayed on the
trading platforms based on these prices. ECN forex brokers also serve as
counterparties to forex transactions, but it is a settlement that they
operate on instead of pricing basis. While fixed spreads are offered by
some market makers, spreads of currency pairs can be very different,
determined by the trading activities of the currency pair. In active
trading periods, sometimes you cannot get ECN spread at all, especially
in those very liquid currency pairs such as the majors (EUR/USD,
GBP/USD, USD/JPY, USD/CHF) and some currency crosses.
Pros and cons of the ECN forex broker
The ECN forex broker has both advantages and disadvantages. The pros and cons of the ECN forex broker are as follows.
The pros of the ECN forex broker can be presented in following aspects.
Traders can usually get better bid/ask prices for they are derived from multiple sources.
At certain time traders may trade on prices with no spread or with only very little spread.
Genuine ECN forex broker will pass on the orders to a bank or other
trading participants on the opposite side of the transaction instead of
trading against the traders.
It is very likely that the prices on the ECN forex broker are more volatile.
Traders can take on the role of market traders to other traders on the ECNs since they can offer a price between bid and ask.
The cons of the ECN forex broker can be presented in following aspects.
Many ECN forex brokers do not provide integrated charting or new feeds.
Some trading platforms are not so easy for traders to use or operate.
Since there are variable spreads between the bid and the ask prices, it
may be difficult to calculate stop-loss and breakeven points in pips in
Forex traders are obligated to pay commissions for each transaction.
It is obvious that there are both pros and cons of an ECN forex broker.
Traders have to take many factors into consideration when choosing a
More video lessons -
Thanks for the very helpful comment,
But my question was about introducing a comprehensive book on broker and how they work.
I'm a trader for some time, I join this forum in order to learn again, thank you for your very useful article.
Your question is best answered by investopedia, and if I may quote them
In the foreign exchange market, traders and speculators buy
and sell various currencies based on whether they think the currency will
appreciate or lose value. The foreign exchange, or forex, market is high risk
and sees more than $5 trillion dollars traded daily. Traders have to go through
an intermediary such as a forex broker to execute trades. No matter the gains
or losses sustained by individual traders, forex brokers make money on
commissions and fees, some of them hidden. Understanding how forex brokers make
money can help you in choosing the right broker."
Hope that helps
Marwa from Towing Service