Forex Account Types: Standard, ECN and Islamic — Key Features and Differences
Forex is the decentralized interbank foreign‑exchange market. Your account type directly determines trading costs and execution quality: the size of the spread (Ask–Bid difference measured in pips, the smallest price increment) and slippage (the difference between the expected price and the actual fill on a market order), plus commissions and overnight charges.
What follows is a structured breakdown of how the three main account types work, with practical “who it’s for” guidance, a selection matrix, a method for calculating total cost of ownership (TCO), a broker checklist, scenario cases, and an extended FAQ. Every term is briefly defined on first mention.
Main Types of Forex Accounts
An account is a model of costs and execution. Standard accounts include expenses in the spread; ECN/raw accounts provide a “raw” market spread and add a commission; Islamic accounts remove swaps while preserving the mechanics of the base account.
Standard Account
Principle: you trade with a spread that includes the broker’s markup, no separate turnover commission. Execution can be DD or STP; when liquidity is scarce, requotes (new quotes if the price has changed) may occur.
- Best for: beginners, relaxed intraday and swing traders with small volumes.
- When relevant: infrequent trades, focus on simplicity (“I only pay the spread”).
✅ Pros
- Simple cost model: expenses are already in the spread, no extra fee.
- Low entry threshold — available with small deposits.
- More stable spreads during calm market periods.
❌ Cons
- Spread is wider than on ECN — critical for frequent entries/exits.
- Possible requotes and delays — risky for scalping and news trading.
- Potential conflict of interest with DD execution.
Key point: practical for starting and occasional trades; as frequency and volume grow, spread costs become critical.
ECN / Raw Spread Account
Principle: “raw” market spread (sometimes from 0.0) + explicit commission per turnover (round-turn). Execution is NDD/ECN: orders are matched directly with liquidity providers.
- Best for: scalpers, active intraday traders, algorithmic trading and news strategies.
- When relevant: high trade frequency, large volumes, strict requirements for speed and execution predictability.
✅ Pros
- Minimal spread: interbank quote without markup.
- Market execution: no requotes, lower latency.
- Transparency: broker earns only on commission.
❌ Cons
- Commission per lot — requires discipline in tracking total costs.
- Some brokers require higher minimum deposits.
- Spreads can widen on news, slippage is possible.
Key point: ideal for high-frequency and speed-sensitive trading; saves on spreads but adds a turnover commission.
Islamic Account (Swap-Free)
Principle: overnight interest charges (swaps) are disabled to comply with Sharia; the base is the conditions of the chosen type (Standard or ECN) but without swaps.
- Best for: Muslim traders; also those who hold positions overnight systematically and wish to avoid swaps (if the broker allows it).
- When relevant: long-term positions where overnight charges are critical.
✅ Pros
- No swaps: positions can be held without interest charges.
- Preserves features of the base account (Standard/ECN).
- Complies with Sharia principles.
❌ Cons
- Alternative administrative rollover fees may apply.
- Often provided upon request and requires proof of faith.
- Classic carry trade is unavailable due to lack of positive swaps.
Key point: a niche “swap-free” mode; always check for alternative fees and holding limits.
Comparing Account Types
Check the essentials: spreads and commissions, execution model, and fit for your trading style.
| Account type | Spreads | Commissions | Execution | Best for |
|---|---|---|---|---|
| Standard | Wider (broker markup) | None per turnover (baked into spread) | DD or STP; requotes possible | Starting out/infrequent trades; small deposits |
| ECN / raw | Minimal (from 0.0) | Fixed per‑lot commission (round‑turn) | NDD/ECN; market execution | Scalping, active intraday, algo/news |
| Islamic | Like the base account; no swaps | Possible admin rollover fee | Same as base account | Traders observing Sharia |
Choosing an Account for Your Strategy
Criterion #1—trade frequency and execution sensitivity. The higher your frequency and the more you care about spread and latency, the stronger the case for ECN/raw. With fewer trades and lower turnover, Standard often makes more sense.
- Scalping / HFT: ECN/raw for minimal spread and speed; build the commission into your model.
- Active intraday: mostly ECN/raw; Standard is acceptable with rare entries.
- Swing trading: infrequent entries—Standard; frequent re‑entries—ECN.
- Long‑term/overnight: account for swaps. If swaps are unacceptable, choose Islamic Swap‑Free; otherwise use the base account’s swap model.
- Algo/news trading: ECN/raw for speed, no requotes, and deeper liquidity.
Account Selection Matrix
| Strategy | Recommended account | Why | Notes |
|---|---|---|---|
| Scalping / HFT | ECN / raw | Minimal spread, market execution | Consider commission and spread widening on news |
| Active intraday | ECN / raw | Lower total costs at higher frequency | With rare trades, Standard can be comparable |
| Swing | Depends on frequency | Infrequent entries—Standard; frequent—ECN | Plan for swaps if holding positions |
| Long‑term / carry | Standard or Islamic | Spread is less critical; the swap model matters more | Swap‑Free removes swaps but may add admin fees |
| Algo/news trading | ECN / raw | Speed and no requotes | Define slippage limits and trading hours |
Trade Total Cost (TCO)
Example: converting an ECN commission into pips: round‑turn commission = 6 USD, pair EURUSD, volume 1.00 lot (pip value ≈ 10 USD) ⇒ commission in pips = 6 / 10 = 0.6 pip.
| Model | Spread (pip) | Commission (equiv., pip) | Expected slippage | TCO per entry/exit |
|---|---|---|---|---|
| Standard | 1.2 | 0.0 | 0.2 | 1.4 |
| ECN / raw | 0.2 | 0.5 | 0.2 | 0.9 |
| Islamic (based on Standard) | 1.3 | 0.0 | 0.2 | 1.5 |
Trader Profiles and Account Choice
Pre‑Account Opening Checklist
- Execution policy: how market/limit orders are filled, requotes, and slippage handling.
- Account model: DD/STP/ECN, liquidity providers, and any markup.
- Commissions and fees: per‑lot commission (round‑turn), swaps, and any Swap‑Free admin fees.
- Restrictions: whether scalping/algo trading is allowed, minimum SL/TP distance (minimum distance from current price), and news‑trading rules.
- Infrastructure: server locations, ping, and available platforms (PC; Android/iOS).
How to Test Execution Conditions
- Choose active hours (London/New York) and quieter windows; place 20–30 trades with small size.
- Record actual spread and commission for each trade; convert the commission to pips.
- Compare the execution price with the quote at send time to estimate slippage.
- Repeat during news to observe spread widening and liquidity changes.
- Compute TCO = spread + commission + average slippage, then compare models.
Risks & Misconceptions
Common mistakes
- “Zero spread is always better”: without factoring in commission and slippage, the comparison is flawed.
- “ECN eliminates slippage”: it does not—slippage is market‑driven and depends on liquidity.
- “Swap‑Free = free overnight”: alternative fees may replace swaps.
- “Any broker labeled ECN is truly ECN”: verify the execution model and counterparties.
Frequently Asked Questions (FAQ)
How is a Standard account different from ECN/raw in practice?
Can I scalp on a Standard account?
Should a beginner go straight to ECN/raw or start with Standard?
Is an Islamic account always free for rollover?
Can I run a carry trade on an Islamic account?
Why do spreads sometimes widen and slippage increase on ECN?
Additional Questions
What does “zero spread” on an ECN account mean?
How do I convert an ECN commission into pips?
When is Standard better than ECN?
Do brokers impose limits on Swap‑Free accounts?
How does STP differ from ECN?
ECN vs Standard Break‑Even Threshold
| Scenario | Frequency | Volume | TCO Standard (pip) | TCO ECN (pip) | Winner |
|---|---|---|---|---|---|
| Scalper | 50 trades/day | 0.5–1 lot | ~1.4 | ~0.9 | ECN |
| Intraday | 5–10 trades/day | 0.2–0.5 lot | ~1.4 | ~0.9–1.1 | ECN (more often) |
| Swing | 2–4 trades/week | 0.1–0.3 lot | ~1.4 | ~1.1–1.2 | Parity/Standard |
| Long‑term | ≤1 trade/week | 0.1–0.3 lot | ~1.4 | ~1.2–1.3 | Standard |
TCO Scenario Cases
| Case | Trades | Volume | TCO Standard | TCO ECN | Takeaway |
|---|---|---|---|---|---|
| A) Scalper | 60/day | 0.5 lot | 1.4 pip | 0.9 pip | ECN saves ~0.5 pip per trade → material |
| B) Intraday | 8/day | 0.3 lot | 1.4 pip | 1.0 pip | ECN clearly wins in active sessions |
| C) Swing | 3/week | 0.2 lot | 1.4 pip | 1.1–1.2 pip | Small difference—Standard is more convenient |
| D) Long‑term | 1/week | 0.2 lot | 1.4 pip | 1.2–1.3 pip | Standard is more rational; factor in swaps/admin fees |
✅ Conclusion
Account type is a deliberate choice of cost and execution model. Standard offers simplicity and a low entry threshold but at the price of wider spreads and the risk of requotes. ECN/raw shines at higher trade frequency, where spread savings and market execution outweigh the commission. Islamic removes swaps but can involve alternative fees or holding limits.
Decision rule: the shorter the horizon and the higher the frequency, the greater the value of ECN; the rarer the trades and the smaller the turnover, the more rational a Standard account; if swaps are unacceptable, choose the Islamic Swap‑Free variant of your base account.
Key takeaway: active and speed‑sensitive strategies—ECN/raw; rare trades and starting out—Standard; religious constraints on interest—Islamic (Swap‑Free).