Does an ECN brokerage use AI for executing operations?

When people think about the Electronic Communication Network in trading, the first idea that usually comes to their mind is an elaborate futuristic machine that analyzes large amounts of data and, within seconds, produces an effective strategy that no human brain can comprehend. The reality might not seem as impressive, but effective, nevertheless.

So, does ECN brokerage use artificial intelligence? The short answer is no and let me elaborate on that.

If not AI – Then How?

ECN operates as a perfect infrastructure, that lets traders get to the markets faster, and surpasses the lengthy processing of the request by brokers. Moreover, ECN does not meddle in the relations between two parties involved in a trade deal.

Finally, since in order to qualify for becoming an ECN an organization has to be both reputable and possess a large pool of clients, ECN can provide its customers with an opportunity to trade among themselves, if the requests are matching with each other.

The most obvious advantages of trading with ECN is the variety of choices and the ability to close the most profitable deal, as well as the overall quickness of the transactions, that are usually completed almost instantly with ECN.

By getting rid of the timely, middlemen element of trading, ECN traders are able to negotiate their deals directly, ensuring both the liquidity and the effectiveness of their activities. On top of that, the risk of traders trading against their customers is almost eradicated with ECN, especially since the trading activity with ECN is completely anonymous.

Although ECN trading might seem like the ultimate solution to maximizing the profitability of your trading, there are a number of disadvantages that you should be aware of. First of all, it is costly. ECN requires a significantly higher amount to be deposited by its clients, as well as having large fixed commissions in place.

Secondly, since the service usually accommodates bugger clients, individual traders will find that it’s impossible to place a small lot within the ECN trading. Finally, there is a high chance of slippage occurring with ECN, since a great number of variables and clients are influencing prices simultaneously.

ECN Does Not Use AI – But It Can Be One

Artificial intelligence and machine learning are becoming more and more popular in various spheres of human lives. What once seemed like a science-fiction fantasy is now a reality, that continues to infiltrate industries for the sole goal of maximizing efficiency and minimizing the human factors.

Trading is not an exception and ECN in particular. Although, as previously mentioned, ECN does not use AI in performing its usual day-to-day functions, the ECN traders can be the AI in itself. In fact, some of the best ECN brokers are offering bots to their clients, often free or for an affordable fee.

The advantages of using trading bots are plentiful. They are working 24/7, free of the human emotions that often impede traders’ ability to execute profitable deals. AI in trading can predict market fluctuations, analyze multiple currency pairings, create a complex trading strategy, identify an opportunity, and act on it – all done simultaneously.

Moreover, using AI software can significantly increase your income and lower the risk of money loss. Finally, robot traders are great for those who are only beginning to explore trading with no prior experience or specialized knowledge of it.

The downside of using bots for trading should not be overlooked.

Firstly, they are mostly programmed to process a large number of data, until the pattern is found. Although it could be a working solution for a number of cases, often, it may result in the robot giving an unjustified amount of significance to the event that could merely be an accident.

Secondly, the robots usually function by closing up multiple small deals daily, which might not prove profitable for many in the long run.

Thirdly, the original programming that the bots base their performance upon strips them of the degree of imagination and creativity that is often a crucial element of successful trading.

Lastly, when using AI software, traders are often faced with the risk of being scammed, if the research about the software provider is not done properly.

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