Understanding ECN Order Flow Trading

ECN or Market-Maker Broker?

Debates over the suitability of ECN versus traditional market-making brokers tend to focus on the following issues, broadly as follows:
• minimum deposit sizes (higher with ECNs)
• spreads (lower with ECNs)
• commissions (higher with ECNs)
• execution (faster with ECNs but at more realistic prices)
• slippage (greater with ECNs)
• exposure to account losses (greater with ECNs)

These are all areas that any trader looking to open a new account should explore before making a final decision as to which type of broker is more suitable, before taking a closer look at the specific brokers themselves.

Missing from this equation is an important question: should a trader's trading style be a crucial determinant of this choice? The smart money's consensus is that it shouldn't, albeit with two exceptions. Firstly, scalpers tend to have an easier time with ECN brokers, even if only because many market maker brokers watch out for and ban this style of trading. Secondly, order flow traders have to use ECN brokers, as the information they need to make their trading decisions is only available through the platforms of ECN brokers.

What is Order Flow Trading?

Order flow trading relies on a simple theoretical basis: the only thing that moves the price is whether there are more buy or sell orders right now. It follows that if you look and see the price levels where clusters of buy and sell orders are placed, you can put the same type of order at or close to the same levels, and trade profitably along with the momentum generated by the crowd.

Price action / candlestick analysis trading follows the same logic by divining the footprints of order flow from the chart. True order flow trading takes things a lot further, however.

How Does Order Flow Trading Work? 

The big players in the market are all using ECN-type trading. The essential point is that while most retail market-making brokers just show bid and ask prices, ECN traders can see the stop and limit orders that are actually sitting in the market waiting to be executed. Not only can they see the prices at which the orders are set to be executed, but their sizes as well: they can see the market depth.

Bear in mind that there is nothing to stop traders putting orders in some distance away from the current price, but then pulling the order out of the market before it actually gets executed. A clever order flow trader might be in a profitable long trade with the price at 90, but with the upward move running out of steam. He wants to drive it further, so he puts a huge sell order much bigger than his position in at 100. Other traders can see this order, which encourages them to buy, expecting to be easily able to get profitable sell orders filled at 100. The price rises, but the trader with the big sell order at 100 actually uses this buying to slowly sell his position. By the time the price hits 99, he has sold out all his position at higher prices, and he quickly removes his big sell order at 100. Mission accomplished for this trader.

This is a simple example of one of the games within games that order flow traders play, some very profitably. If you are ready and suitable for an ECN broker, a new world of opportunity might be beckoning.
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Day Trading Strategies

Day trading has come a long way since its inception. It was introduced in 1975 as an acceptable mode of trading stocks when the United States Securities and Exchange Commission (SEC) ruled that fixed commission rates, which had been set till then at 1% of the trade, were illegal. This enabled brokers to offer their clients a much reduced commission rate. It also opened up a whole new concept wherein not only brokers could place trades but everyone had the capability to sit in front of a computer and buy and sell stocks all day. From here emerged a whole industry of day trading which subsequently branched out from stocks to other investment instruments, such as futures, options, Forex and commodities.

Day Trading Strategies

There are many day trading strategies. Some follow the same pattern as does broker driven trading while others are unique to day trading. The idea behind day trading is to gain profits by taking advantage of the small price movements in liquid stocks and indexes. One way of doing this is to leverage large amounts of capital which gives the trader additional funds to use for placing trades.
When considering day trading strategies, the first one to look at are the entry strategies. A day trader should first consider selecting stocks that seem ideal for day trading. The liquidity and volatility of the stock are the next things to consider. Liquidity offers the trader the opportunity to enter and exit a stock with a tight spread and at a good price. The volatility of the stock is the measurement of the daily price range within which the stock is expected to move. Greater volatility can lead to greater profit or loss. 
There are several ways to identify entry points including technical analysis such as candlestick charts and trend lines. Staying current with financial news can provide important data for market movements. In addition, a day trader can be on the lookout for orders that are coming in from elsewhere and take note of the increasing or decreasing volume of the stock.

Stop Losses

Using stop losses is another important day trading strategy. Most day traders trade on margin this can be quite risky as steep price movements happen constantly. A stop-loss triggers the predetermined price where a trader will stop trading. This price should suit the risk tolerance of the trader. In addition, a day trader can make a mental stop-loss whereby he/she will exit a position if it takes an unexpected move. By predetermining a maximum loss for each trading day, the day trader will feel less tension and stress during the day secure in the knowledge that he will not find himself in a terrible situation at the end of the trading day. Experienced traders will use this day trading strategy; novice traders believe they must make up the loss and instead of ceasing to trade, they take unnecessary risks in order to break even. 
Other day trading strategies have developed over time and have become very popular for day traders. Scalping, for example, involves selling immediately after a trade has become profitable, i.e. when the price has gone above or below the target price. When a price rapidly moves upward, a day trader can use Fading to short the stock. This may be risky but offers nice rewards. Daily pivots is a day trading strategy whereby the trader endeavors to buy at the low of the day and sell at the high of the day, taking advantage of the stock's daily volatility. Using momentum when day trading may involve the purchase of stocks based on ongoing news reports and riding out the trend until it begins to reverse. Other momentum traders will watch for a strong trend in either direction and an increased volume and then place a trade.
All of these day trading strategies have enabled traders to increase the volume of their day trading and have provided the ability for more and more day traders to create a full time business from the comfort of their home.
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The Advantages of MetaTrader Signals Services for Traders

MetaTrader 4 and the recently introduced MetaTrader 5 are electronic trading signals used by online retail foreign Forex traders. The software consists of both a client and server component and is licensed to foreign exchange brokers who provide it to their account holders. The server component is run by the broker. The client software is used by the trader to see live streaming prices and charts, place online orders and manage his or her account.MetaTrader Signals is a social trading service and with millions of traders subscribing to the same platform, the opportunity for additional profits is obvious. 

The “signals” in the new Meta Trader trading platform allow traders to connect to any signal issued by a provider anywhere in the world. A trader can select and then subscribe to any trading signals provider and can then duplicate these deals in his own trading account.


What are the advantages of the Meta Trader service for traders?

First of all, signing ups for the Meta Trader service is straightforward and even a novice trader can get on board with only a few clicks. Once the Meta Trader terminal has been installed, a trader needs only to select a signal provider and he can initiate trading.

With the Meta Trader platform, a trader is not required to come to any formal arrangement with a provider. Only the pricing and trading terms of the signal provider require an upfront agreement. The Meta Trader signal provider market is the largest market around, listing thousands of successful traders from all over the world who deliver their signals in the market. In addition, there is no stipulation that a trader maintain an account with the same brokerage company as his or her signal provider. There is total freedom of choice when it comes to selecting a brokerage company.

There are no commissions to the provider. A trader pays only for what has been agreed upon when signing up for the service. There are also multiple payment options available to a trader.

Less Fraud

Chances of scams or fraudulent behavior by signal providers using the Meta Trader platform is almost none existent since providers are scrutinized exceedingly to ensure that only profit making providers enter the provider market. It is, of course, vital that the signal provider chosen is trustworthy so a certain amount of research should be done before selecting someone. 

With Meta Trader, chances of loss are less than with other investments since a trader can select a signal provider with a track record that meets a specific trader’s expectations and whose trades can then be duplicated on his or her own trading terminal. Trades are synchronized in real time and are automatically placed.

Secure and Anonymous

Another important aspect of the MetaTrader platform is that it is secure and anonymous. A trader does not have to worry about trader privacy since traders’ information is not visible to the signal providers.

MetaTraders can copy the Stop Loss and Take Profit Levels of their signal provider. For novice traders, who do not know when to Stop Loss and when to book profits, this can be a real advantage. In addition, a trader has the option to designate the percentage of the amount he or she wishes to trade. This helps in stopping unexpected losses and maintains a buffer zone for his account. Another option terminal is the “Stop if Equity is less than A” feature which puts a break on all actions if the equity level in a trader’s account falls below a pre-specified level. All positions automatically close and pending orders are also removed. This limits one’s losses. 
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How to Choose the Best Forex Robot

With today’s fast paced trading options, choosing the best Forex robot has taken on a major role in Forex trading. The use of a Forex robot is basically one of the methods employed by a trader to buy or sell on the Forex spot market. It is often referred to as ‘autotrading.’ Although autotrading was originally used on the Chicago Mercantile Exchange as far back the 1970’s, it emerged big time with the advent of the internet in 1999. Today, most online brokerages offer Forex robots.

There continues to be a debate, however, as to which is a more beneficial manner for placing Forex trades—using autotrading or employing the service of a human trader. Obviously, an automated trading situation can accommodate more trades per market than any human can cope with. Additionally, with autotrading, trades are placed in real time and a trader can replicate these actions across several timeframes and on more than one market. What’s more, robots are not subject to the emotional ups and downs of human traders.

On the other hand, even the best Forex robot can be subject to scams and frauds. Traders do not always understand how the system works and this leaves them vulnerable to all sorts of broker rip-offs. It can lead not only to traders placing inappropriate trades but can result also in shrewd brokers closing up shop and absconding with clients’ funds. In addition, robots are not easy to set up and choices for customized trading strategies can be complicated for novice traders. If not fully understood, trading activity can go unmonitored and consequently lead to losses.

The Best Forex Robots
Choosing the best Forex robot is not always an easy task. There are hundreds of online brokers with each one touting to offer the best Forex robot software, the most outstanding platforms and the finest technical analysts. The most advantageous way to reach a decision is to speak to people who have used Forex robots for a while. Referrals from experienced traders go a long way in weeding out brokers who do not abide by industry regulation or who are not bona fide Forex brokers. Ongoing Forex traders are also privy to information concerning brokers who have not performed in the manner they promised or are rumored to have conducted business in an unacceptable manner. After all, the robot is only as good as the brokerage offering it.

Likewise, there are literally hundreds of Forex robots that are offered not by brokers, but by individual traders looking to make a quick buck. While some of them may be profitable, there’s a higher chance with these robots that losses may occur. Make sure to verify the robot’s success before registering, and if possible, see if the company is registered or regulated anywhere. If these things aren’t available but the Forex robot still seems interesting, try asking for references or seeing if the company offers reliable testimonials. Without some sort of validating feature, your service of interest may not actually be the best Forex robot available.
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Binary Options: The Basic Terminology

Every financial market has its accompanying lingo. Words and phrases you will only see used in the context of that specific market. In Forex trading, there are pips and spreads and in Binary Options, there is “In the money” and “Out the money”.

The following are some explanations about the primary terminology used to describe the Binary Options market.

• Binary Options: The basic explanation is that like the meaning of the word “Binary”, with Binary Options, there are only two possible outcomes. You were either correct in your prediction and you therefore make profit, or you were incorrect, in which case you lose your money. How much do you make or lose from Binary Options? Well, that depends on your initial investment, but there is no issue of experiencing huge unexpected losses or making astronomical profits. 

• Call Option: When a trader predicts that the instrument will increase in price. Even if the price then increases by a tenth of a cent, you profit from such a Binary Option.

 Put Option: When a trader predicts that the instrument will decrease in price. Even if the instrument then decreases by a tenth of a cent, you profit from such a Binary Option.

• In the Money: If you “win” the trade, it is referred to as “In the Money”. For example, if you placed a Call Option, and the price increased, you are then “In the Money” in that Binary Option. On the flip side, if you placed a Put Option and the price decreased, you are also “In the Money”.

• Out the Money: If you “lose” the trade, it is referred to as “Out the Money”. For example, if you placed a Call Option, that the price decreased, you are then “Out the Money” in Binary Options. On the flip side, if you placed a “Put Option” and the price increased, you are also “Out the Money”.

 At the Money: If the price of the instrument is identical at the expiry date to the amount that it was at the trading time. In this scenario, you were neither right nor wrong, in which case, your investment is returned to you in full with Binary Options.

• Expiry Date: The time or date at which the Binary Options expire and the price is examined to see if you are In the Money or Out the Money.

In conclusion, at first glance, some of the Binary Options lingo can seem confusing and overwhelming, but after a little reading, it all clears up and becomes understandable. 
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