[HFM(former HotForex): For beginners] Ordering method NDD, STP, ECN


There is something called an order method when trading at a Forex company, and many people are probably worried about it. There are two methods of operating FX brokers: the “dealing desk method” and the “no-dealing desk method,” which is widely used. Even if the no-dealing desk method is adopted, there are two ordering methods, the “ECN method” and the “STP method”.

Order method

HF Markets consists of accounts that adopt the NDD and STP methods. Please refer to the article below for the differences in order methods depending on the account type. Here, we will explain the difference between the ordering methods.

Dealing disk method

The dealing disc method is often abbreviated as DD. As a mechanism, the FX company processes the order from the customer once internally and then issues the order to the interbank market. Forex brokers can set exchange rates internally and lock spreads. This means that traders can trade with tighter spreads. The disadvantage is that it becomes possible to commit fraud such as stop hunting and contract refusal. If a malicious company adopts the DD method, they will be able to do whatever they want.

Non-dealing disc system

The non-dealing disc method sends customer orders directly to the interbank market. Arbitrary price manipulation is no longer possible, and highly transparent and fair transactions are possible. The execution speed is also fast, and there is no contract rejection. Most Forex companies use this method, and HF Markets also uses this method. The difference between DD and NDD is whether or not to mediate the Forex company. And in the case of the NDD method, it is divided into the STP method and the ECN method.

Straight through processing method

Often called STP. The straight through processing method is one of the NDD methods. This ordering method is named after the initials of Straight Through Processing. In the case of FX brokers adopting this STP method, they refer to the rate of the covered financial institution, add the spread to the rate and present it to the trader. Therefore, the spread tends to be wider than the DD method.

Electronic Communications Network System

The Electronic Communications Network System is a name derived from the initials of Electronic Communications Network. It is called ECN. It is an ordering method that directly connects to a private exchange called ECN, and it is a method of taking a commission at the time of trading instead of adding a profit spread. This narrows the spread.

Advantages of ECN method

The advantages of the ECN method are as follows.

Fast execution speed

The biggest advantage of the ECN method is that it increases execution speed. This is because ECN differs from STP in that orders between buyers and sellers are placed directly and automatically through electronic trading. If execution power is low, there will be a disadvantage that orders will not be executed when orders are concentrated, which is especially disadvantageous for scalping traders.

narrow spread

The advantage of the ECN method is that the spread is very narrow. This is because the price difference between the trader’s order and the interbank order becomes the spread. ECNs are suitable for short-term traders because they can be traded without any intervention.

Disadvantages of ECN method

ECN also has disadvantages.

Transaction fees apply

While the ECN method has the advantage of extremely narrow spreads, it also incurs transaction fees. Some people may find it risky because they have to calculate the commission amount every time they make a trade.

High trading volume

In the case of the ECN method, it can be said that it is suitable for professional traders. Since there are many cases where the trading volume is high, there is a possibility of large profits, but there is also a risk of large losses.

Bonus campaign not applicable

In the case of the ECN method, bonus campaigns etc. are likely not applicable. Please be careful as you may be excluded from the campaign.

Comparison of ECN method and STP method

So what is the difference between ECN and STP?

Spread/trading fees

The narrowness of the spread and fees are also different between the ECN method and the STP method. With the ECN method, spreads are often narrow, but trading fees are often charged. With the STP method, there are no commissions in exchange for wide spreads. Therefore, both have their advantages, so I think it depends on your preference.

Rejection of execution

In terms of execution power, the ECN method is suitable for large lot orders during periods of high trading volume, while the STP method increases execution power for orders of small lots during periods of low trading volume. Therefore, there are considerable differences between the two in this respect, and preferences differ depending on the transaction conditions. Contract rejections are more likely to occur if the time zone is incorrect.

Presence or absence of board information

The ECN method is better for the large amount of information. This is because with the ECN method, you can obtain board information that cannot be seen with the STP method. ECN is recommended because you can gain an advantage in trading by obtaining board information.

HF Markets ordering method

HF Markets order method is NDD/STP. All accounts use the NDD/STP ordering method, so compared to other companies that use the ECN method, the execution power is slightly lower.

Which is better, the ECN method or the STP method?

The ECN method has higher execution power than the STP method in times of high trading volume and large lot transactions. On the other hand, the STP method has a difference in that the execution power is high in times when the trading volume is low and in small lot orders. Also, the amount of information is clearly higher in the ECN method. In the ECN method, it is possible to see “board information”, which is not possible in STP. This is because you can check market liquidity, order volume, and how many orders are occurring at the current price range of the market. Overall, ECN is better.

ECN account has no bonus

ECN accounts tend to be a disadvantage that there is no bonus. While both STP accounts are applied to any Forex company, ECN accounts often only apply account opening bonuses, which is a disadvantage. It can be said that ECN accounts are for experienced traders because they often compete with “full capital”.

A method that suits your trade

Which one to choose should be chosen according to the method suitable for your own trading. In terms of transparency, the ECN method is higher, but the STP method may be advantageous for trading due to the relationship between fees and spreads. This is because the trading hours also come into play here.