Anyone is trading Forex? 50:1?

trinfo,

You are right that the spot market is WAY more liquid than the futures...that has always been a problem for the exchanges. Because most currency trading is done by huge institutions/banks and they are used to the old method of getting raped by each other, there hasn't been much outcry for trading on a regulated, central exchange. But for the individual, the costs of spot trading can outweigh the benefits.

def,

Thanks for your help (again). I am an IB client (very satisfied I might add) and I will try watching the mini contracts for a few days and see how they look.

Kirk
 
another ECN style outfit is hotspotfx.com.... however they are kinda like a 'johnny come lately' comparing to matchbookfx.

just got all the paperwork ready for matchbook and will get account open soon.

Sounds like a great market to trade.. 24-hour liquidity, tight spread. Finally I can do some long term trading. The gaps on the equity market throw everything outa wack. Been strictly an intraday naz trader to this point.
 
PKJR, no, I haven't checked gain capital. Do you have any experience with them?

I would prefer an ECN style outfit, so that you get anonymous trading and instant execution.

Been paper trading these days... man, what a different mindset from trading the naz stuff.
 
After about a month of checking the Forex market, here is my experience:

Opened an account with MatchbookFX, didn't see the tight spread I expected.. everything is 5 pips wide all the time.. this is no good for short term trading. If you watch the futures, they are actually tighter than the spots.

I guess for now Forex is not a viable short term vehicle. I did some back testing on some intermediate term strategies, holding positions 1-15 days, 1 unit of JPY, CHF and AUD actually made $90k to $200k from 1987, with max drawdown of about $5k, which is not bad. If anybody is interested, I am willing to trade your account with this model for a fee :)

So, back to the old NYSE.
 
With regards to MatchbookFX, I believe you clearly do not understand the system. The spreads are quoted at 5 pips almost as a "worst case" scenerio. The market acts just like an ECN. You are more than welcome to bid or offer inside those quotes. You can act as market maker or taker. It is really not much different than Island or any other ECN, in that you are trading against other FX traders. You are not trading against Matchbook. I think this point needs to be made perfectly clear. If anything, Matchbook has "Specialists" that control the market in case things get out of wack so that you have price levels to get into and out of. This, eliminates "air pockets" but also puts Matchbook at a disadvantage. They would MUCH rather see you make the market. They probably dont make anthing off of their trading operations and in fact may lose. They provide the specialists as a value in order to encourage liquidity. And in fact that is what has happened. The FX specialist at matchbook are not having to step in near as much anymore as their ECN becomes more and more liquid.

This months Active Trader magazine has a MUST READ article on FX trading. Anyone with the slightest interest in it should look it over.

FWIW, I would have to say on a fair market like Matchbook, FX is the fairest market of all to trade. There is no inside information. There is almost no way to manipulate it. All the news is accessible to all the people. And the markets can really trend in certain directions for very long periods of time. When you participate on and ECN, it is allowing you, if you wish, to quote the market yourself. I really dont see any comparisons.

Best,

Mike
 
Well, if you understand the system so well, tell me what good an ECN is if there is nobody come to hit your bid or offer.

I watched Matchbook's market for a whole day and only a handful of trades going by... if the trades are so illiquid, there is no use to put in bids/offers as you have to maintain it all the time.Why not trade the futures where the spreads are typically 1-4 points wide, they follow the spot market almost tick by tick, and with a tighter spread.Besides,futures trading is regulated.

It's true that forex market is very fair, but paying up 5pips for every trade for short term trading of 1-3 holding period is not gonna get you anywhere. Besides, for short term trading, manipulation is not neccesarily the enemy of a daytrader, if you are on the same side of the manipulator.
 
Well. to answer your questions...

1) How do you know how many trades are coming and going? There is no Time and Sells. You see a couple of things when you look at the screen...You see the depth of the book/market...very similiar to a level 2 screen....and you see the prices change...you do not see time and sells. So you can't say "only a handful of trades where done" FWIW, Matchbook is doing about 500 million a day, most of it in Dollar/Yen Euro/Dollar and some in Euro/Yen...so if a half a yard a day is going by on a couple of trades, well...

2) The 5 pip spread that is quoted is the worst case scenario. The fact of the matter is, even in the interbank trading "system" (i put system in quotes because its not really a system, but a bunch of guys calling each other on the phone) the best you will get is 2 pip. Some internet fx brokers may show 3 pips, but try and hit them, and all of a sudden they fall off the bids. Matchbook's Specialist is showing the worst case scenario and will in fact honor on the hit...it goes right to the ECN and is matched.

3) If you will step in as a "market maker"...i.e. just put a limit order on the book, if that order is hit, Matchbook does not charge you a commish...Only the aggressor of the trade is charged a commish.

4) As to why trade the cash market instead of the futures? Really, the question is why trade the futures? The futures were set up because not everyonne has access to the interbank system (plus hedging etc). The fact of the matter is, by design, Futures markets are set up for things that where highly illiquid - such as tons of beans or the value of a stock index - in order to off-set the price risk of the producer and end user. The speculator takes on this price risk and hope to profit by price change. This does not make futures markets liquid, just more so than some underlying commodities. Some futures markets are highly illiquid and the spread is enormous. An example of this is the Nasdaq 100 Futures pit which trades the "big" contract. The spreads can be huge and "air pockets" are all over the place. On guy told me that on the Friday afternoon before Memorial Day Weekend, there were three locals in the Nadaq 100 pit. Now compare that to the emini version which trades electronically on Globex. Very liquid. In fact, it is used to arbitrage against the pit. The point here being that just because its a regulated futures market does not make it perfect.

5) With the leverage that is envolved, why do you need futures? You can be far more flexible in how much leverage you want to work for AND against you in the cash market.

6) This part here is just personal opinion. Im not one to critisize trading styles if its making money for you. But I would not use the FX market to day trade. Because it can trend so nicely and because of the leverage that can be used, I would use it trade in excellent trading style of Darvas, in which you keep adding to a position as long as it keeps going your way, and when it changes you run like a thief. Darvas describes this style, but the problem is trying to find really long term true trending markets (the junk bond market can do this for a periods as an example)...FWIW, this is how I would use FX...and not to sell some Black Box System...for a fee of course.

Best,

Mike
 
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