Is ECN good for scalping?
ECN is an excellent option for scalping. There are several ECN features that give it an advantage when it comes to scalping as a trading strategy.
As we know, scalping takes advantage of small price movements by quickly entering and exiting trades. Therefore, it is a high-frequency trading option with special features for success. ECN has the following qualities that make it perfect for scalping:
High Liquidity
Due to the high number of traders willing to buy and sell on ECN at various price points, it experiences high liquidity which is beneficial for scaling. High liquidity provides for faster execution because the high volume of traders means they are more likely to find matches for their trades.
This quality is especially useful for scalpers who need to be fast when entering and exiting trades as they attempt to capture small price differences and thus maximize their profit.
Low Costs
Out of the options scalpers have, ECN offers some of the lowest trading fees on the market. For a high-risk trading strategy such as scalping, the lower the non-trading costs the better.
Direct Market Access
Direct market access means that traders can interact directly with the order books of participants such as banks and institutions, in addition to other traders thus widening their scope.
Direct access thus reduces execution time while reducing slippage, attributes that are invaluable for scalpers.
Tight Spreads
Tight spreads are essential when reducing risk. ECN brokers can easily provide tighter spreads because they aggregate prices from a wide range of liquidity providers. For traders who need to act fast, reducing risk is essential.
Depth of Market
Depth of market refers to the buy and sell order data at various price points. This depth of market gives scalpers more information about the market allowing them to make more informed decisions about their high-risk trades.