Broker recommendation for a Canadian with specific requirements

[k p]

I know there are a million threads on this, but nothing specific enough so I'm looking for help. I am going through Bob Volman's excellent book on Forex Price Action Scalping and hence am not going into this blind as I have been studying price action for months now.

First, I am in Canada, so that is part of the consideration. The regulation here is heavy and if the broker is in Canada, I believe they have to a member of the regulatory agency that automatically protects you up to $1MM. This isn't a requirement though, but I just want to make sure that withdrawals and deposits can be done easily through online banking and hence I'm looking at a Canadian or US operation.

Second, I need tick charts. I have an account with both Interactive Brokers as well as Questrade in Canada, but neither of them provide tick data. Although a 30 second chart may be close in some cases, there are far too many differences.

Third, is of course the spread or commission structure. Bob advises trading EUR/USD, so that should offer the lowest fees, but he states that for a scalper, 1 pip round trip is what you should be looking for cause anything more makes it difficult to profit as a scalper. On IB I see that the spread on this currency pair is easily 0.5 pip, so that adds up to 1 pip round trip, but no tick charts with IB. Questrade, which doesn't even offer tick charts anyway has about a 1.8 pip spread from what I am reading, and it seems like this is just one way, so 4 pips round trip.

Fourth, I am looking to fund the account with a number that would hopefully allow me to look at serious brokers. I am looking to just get my feet wet so $1000 or $2000 is what I am looking at, but this is way more than the $100 or $500 that most people are throwing around, so will this be sufficient to open an account with a serious broker?

Lastly, one click execution to buy or sell with automatic bracket orders to close out the position with a 10 pip profit or loss, hence an OCO order that is automatically entered once the initial order to take a position is filled. I imagine this should be standard for most Forex platforms, but I haven't looked too much into this. I don't need a fancy platform or fancy indicators other than these requirements.

There are just so many options out there and I'm sure many are scams so I'd like to be steered in the right direction. Thanks!

 

[Pippi436]

You don't need to use charts from your broker really, even for short term trading. I'm using SierraCharts - its just $27 per month and has everything i need. I have never noticed any lags in their fx feed (in contrast to esignal). You could also use Ninjatrader, which is free for charting, if you manage to find a reliable datafeed for that.

For execution i am using lmax. Its a UK firm, so client money is protected up to GBP 50K. Orders are executed on price/time priority matching - same as on an exchange. I think its probably the best market access a retail trader can get for spot fx right now.

I am paying $16 per million commissions. But that will vary depending on your activity level. With only 10K you will pay their standard commissions of $25. But theres an ib that can reduce that to $20, so on par with IB.

 

[Jack_Larkin]

Quote from k p:

On IB I see that the spread on this currency pair is easily 0.5 pip, so that adds up to 1 pip round trip, but no tick charts with IB. Questrade, which doesn't even offer tick charts anyway has about a 1.8 pip spread from what I am reading, and it seems like this is just one way, so 4 pips round trip.

If the spread is 1.8, then the "round trip" is just 1.8. You only play the spread once for the trade.

Think about it like this: Assume a spread of 2 pips on XXX/USD pair and assume this price stays still for this example... if you buy at the offer right now and open a position, then to sell the position back and close out the trade you'd have to sell to the bid price 2 pips away. That's the spread cost in total.

Now, that being said, a lot of brokers also mix in commissions if they show a thin spread, and often the commission rate is a dollar amount per million in notional value traded (this, not a fixed amount, as it scales up with the trade size.) So this needs to be factored in as well. (IB for example has commissions atop of their thin spreads.)

--

That aside, as a Canadian you have two options really:

1) Stick with an IIROC regulated, CIPF insured, Canadian brokerage.

Pros
- Gain deposit insurance up to $1MM

Cons
- Be limited in broker selection (it's a non-competitive environment to be blunt about it.)
- Be limited to IIROC set margin requirements. (Very restrictive, set on a pair by pair basis and often ~33:1 at best or even 4:1 max on some exotics.)
- No hedging.

2) Go Offshore to an FCA (UK), ASIC (Australian), Swiss, or Euro regulated broker.

Pros
- Gain access to silly high leverage, ~100:1 in the UK and 400:1 is common in Australia.
- Ability to open opposing positions on the same pair at the same time (hedging.) If you want to hold swing trades for weeks on your account while scalping in the intra-day this would be of use.
- Much wider selection of brokers, and the offerings are very competitive even for small account holders.

Cons
- Lose CIPF deposit insurance (although some offshore brokers are covered by their local government's protection programs.)
- Lose the ability to complain to IIROC if something goes wrong. (You'll have to take it up with the regulatory body in charge of broker.)

And before anyone tells you different, in most cases you can trade with an offshore broker as a Canadian... Some provinces do make it harder, like BC for instance, but personally as an Ontario resident I haven't had any issues trading with various UK and Australian forex brokers.

--

As a Canuck, right now I trade with Oanda here in Canada, and Pepperstone in Australia. (Links are to ET's broker review section.)

I've been with both brokers for many years now and they continue to meet my expectations. I've traded with many, many other brokers in the past.. some were good, and others downright shady, but right now my needs are met with just the two.

Both also do the OCO order you're looking for. Oanda has the option to append a TP and stop by default on all trades through their fxTrade platform, and Pepperstone has a plugin for MT4 that shows a DOM and one click trading buttons with preset stops and TP order levels.

Hope that helps.

 

[Jack_Larkin]

Quote from Pippi436:


For execution i am using lmax. Its a UK firm, so client money is protected up to GBP 50K. Orders are executed on price/time priority matching - same as on an exchange. I think its probably the best market access a retail trader can get for spot fx right now.

LMAX no longer accepts Canadians, despite them being a UK firm...

 

[Jack_Larkin]

Also, about tick charts:

Since FX isn't centralized, there is no 'correct' global volume or Time and Sales feed. So there really isn't a way to construct "tick charts" in the same way you'd see on the futures exchange.

FX platforms will display tick volume though (instead of volume,) but the "ticks" are just a change in price, not a transaction taking place.

This means your 133 tick charts will look hella different broker to broker.. and that will through you off if you're planning on trading bar price action on tick charts.

It would probably be best if you stick with charting the futures equivalent of a given currency pair for tick charts (use a free service like Thinkorswim's papermoney or a CQG demo with NinjaTrader,) and executing in the spot FX market with your FX broker.

That or forget the notion of tick charts in spot alone.

 

[k p]

Wow Jack, thank-you so much for the thorough reply.

The round trip nature of spreads I did not know about, so this helps a tremendous amount. With IB having spreads as low as 0.5 pips for the EUR/USD pair this certainly seems attractive. I believe their fee was $2.50 per trade, but I take it that based on your description this means per million. So if I was to trade 100,000 units or a full contract, does this mean I would get charged $2.50 when I traded it 10 times? And how is a transaction calculated, is it round trip as with the spread, or does a round trip mean 200,000 units since I first have to buy 100,000 units and then sell 100,000 units?

With regards to the tick data info, are you sure? In my book by Bob Volman, he clearly states that the charts that he uses, the 70 tick charts, represent 70 transactions taking place for every bar. The volume in each transaction might be different, but each bar is made up of a 70 transactions.

I am planning to trade price action based on the bars, so it is very important that things look right. I do understand that currency trading doesn't have a centralized exchange like futures though. I just want to make sure that the techniques I am learning will be applicable and that a negative result wont be from having improper charts or a data feed.

I am going to look into Oanda right now. Leverage isn't that huge of a problem. If I find I am doing well after several weeks I can just deposit more money into the account. That spread seems to be the more important factor for long term profitability. Oh.. and I am resident of BC, so I took note of the things you said in regards to off-shore brokers.

Quote from Jack_Larkin:

Also, about tick charts:

Since FX isn't centralized, there is no 'correct' global volume or Time and Sales feed. So there really isn't a way to construct "tick charts" in the same way you'd see on the futures exchange.

FX platforms will display tick volume though (instead of volume,) but the "ticks" are just a change in price, not a transaction taking place.

This means your 133 tick charts will look hella different broker to broker.. and that will through you off if you're planning on trading bar price action on tick charts.

It would probably be best if you stick with charting the futures equivalent of a given currency pair for tick charts (use a free service like Thinkorswim's papermoney or a CQG demo with NinjaTrader,) and executing in the spot FX market with your FX broker.

That or forget the notion of tick charts in spot alone.

 

[Jack_Larkin]

Quote from k p:



The round trip nature of spreads I did not know about, so this helps a tremendous amount. With IB having spreads as low as 0.5 pips for the EUR/USD pair this certainly seems attractive. I believe their fee was $2.50 per trade, but I take it that based on your description this means per million. So if I was to trade 100,000 units or a full contract, does this mean I would get charged $2.50 when I traded it 10 times? And how is a transaction calculated, is it round trip as with the spread, or does a round trip mean 200,000 units since I first have to buy 100,000 units and then sell 100,000 units?

You'll have to reference IB's commission schedule.. I think $2.50 is the minimum no matter how small your size is, but there is no max and the charge is a few basis points of the notional value of the trade.

Quote from k p:


With regards to the tick data info, are you sure? In my book by Bob Volman, he clearly states that the charts that he uses, the 70 tick charts, represent 70 transactions taking place for every bar. The volume in each transaction might be different, but each bar is made up of a 70 transactions.

I am planning to trade price action based on the bars, so it is very important that things look right. I do understand that currency trading doesn't have a centralized exchange like futures though. I just want to make sure that the techniques I am learning will be applicable and that a negative result wont be from having improper charts or a data feed.

Yes, I'm sure. Forex is not traded on a central exchange. It's decentralized and traded between many different venues, each with their own contract specifications, regulations, and mix of different participants and liquidity providers... so without central reporting or central clearing, how do you suppose one broker can tall up "70 transactions" to make a tick bar (in your case) when they likely can't see any transactions taking place beyond what they directly do with their liquidity providers?

Given this, FX platforms often have a measure of volume called "tick volume". This is NOT transaction volume. Tick volume only measures the frequency of quote change (like when a price gets requoted or moves.) And since quote change frequencies will change from quote feed-to-feed, you can't construct a "tick chart" and expect it to look exactly the same between brokers.

I go back to my earlier suggestion and point out charting FX futures based on tick charts since they are traded on a central exchange and you can sorta use them to infer the transaction activity in the spot market. It won't be a perfect substitute, but it's better than using "tick volume", and at least tick charts are common place in the futures world so most futures platforms will have them (where as they aren't common on spot forex platforms.)

That's not suggesting you trade FX futures though, stick to executing on spot, as spot is more liquid, especially on non-major pairs.

Quote from k p:



I am going to look into Oanda right now. Leverage isn't that huge of a problem. If I find I am doing well after several weeks I can just deposit more money into the account. That spread seems to be the more important factor for long term profitability. Oh.. and I am resident of BC, so I took note of the things you said in regards to off-shore brokers.

Ah, as a resident of BC you'll find going offshore to be a bit harder.. some places still do take BC residents though (Pepperstone for example,) so you're not out of luck completely.

Oanda is fine too. Though, I suggest staying out of a trade around news releases. While most brokers have their spread widen during major news, Oanda widens it considerably and holds it wider for a bit longer than others... they are great for trading most other types of ways, just not the best around news.

 

[k p]

So then do I assume that this tick volume is what the author means when he is referring to tick charts and just wanting to keep the book less complicated? I of course don't care about the particulars all that much, just as long as a tick chat in my platform will look like the tick charts in the book's examples. I fully understand though how each broker would have different charts because they each have their own transaction data to work with. I am eager to compare how the 70 tick chart will look in relation to the 30 second chart. During busy periods it sounds like it will be quite significant and hence why I want to be starting with the best data possible so I'm not needlessly wasting money or learning things the wrong way.

The Pepperstone broker does seem reasonable, but at the same time, Oanda looked good as well. I like their chart that shows the spread over time, where weekends for example are much worse. They state a 1.2 pip spread during the good times, so I will start monitoring next week. Can't for the life of me see any numbers on minimum account size though, but it seems like they say no commission and you're only paying the spread, which being 1.2 during regular market hours seems excellent.

I see many brokers also offer this Meta Trader 4 platform. Is this some fancy charting platform that is offered in addition to what the broker might have custom designed for themselves? I'm familiar with Ninja Trader or Tradestation as options for trading stocks or futures if you don't like the inhouse platform that your broker might use, so is this the same idea for Forex?

Quote from Jack_Larkin:

Yes, I'm sure. Forex is not traded on a central exchange. It's decentralized and traded between many different venues, each with their own contract specifications, regulations, and mix of different participants and liquidity providers... so without central reporting or central clearing, how do you suppose one broker can tall up "70 transactions" to make a tick bar (in your case) when they likely can't see any transactions taking place beyond what they directly do with their liquidity providers?

Given this, FX platforms often have a measure of volume called "tick volume". This is NOT transaction volume. Tick volume only measures the frequency of quote change (like when a price gets requoted or moves.) And since quote change frequencies will change from quote feed-to-feed, you can't construct a "tick chart" and expect it to look exactly the same between brokers.

I go back to my earlier suggestion and point out charting FX futures based on tick charts since they are traded on a central exchange and you can sorta use them to infer the transaction activity in the spot market. It won't be a perfect substitute, but it's better than using "tick volume", and at least tick charts are common place in the futures world so most futures platforms will have them (where as they aren't common on spot forex platforms.)

That's not suggesting you trade FX futures though, stick to executing on spot, as spot is more liquid, especially on non-major pairs.



Ah, as a resident of BC you'll find going offshore to be a bit harder.. some places still do take BC residents though (Pepperstone for example,) so you're not out of luck completely.

Oanda is fine too. Though, I suggest staying out of a trade around news releases. While most brokers have their spread widen during major news, Oanda widens it considerably and holds it wider for a bit longer than others... they are great for trading most other types of ways, just not the best around news. [/B]

 

[def]

Two comments on IB's spreads.

1. The minimum displayed value is .5 pips but you can get price improvement if one of the banks providing liquidity has a better offer (the additional digit doesn't display).

2. You can work a market. Ie. you don't have to pay the spread. You can place a bid or offer and let is sit on the book.

 

[Jack_Larkin]

Quote from k p:

So then do I assume that this tick volume is what the author means when he is referring to tick charts and just wanting to keep the book less complicated? I of course don't care about the particulars all that much, just as long as a tick chat in my platform will look like the tick charts in the book's examples.

The whole reason I brought this up is because they won't look the same. between your book and the charts. Price extremes will appear the same, but the bars will be different, starting and ending at different points, etc...

Tick volume does not equal tick charts...

A tick chart needs to be constructed from transactions on Time and Sales (in equity and futures markets that is.) Since FX lacks a time and sales feed (given it's a decentralized market,) the only way to paint a tick chart would be to use tick volume numbers instead.. this is where the variance in tick volume between brokers raises issues, aside from the fact that the whole premise of tick charting (the price action you're talking about) is based on traction volume and using 'tick volume' doesn't reflect actual transactions.

Quote from k p:


I fully understand though how each broker would have different charts because they each have their own transaction data to work with.

It's not even that they only give you "their" volume...Most FX brokers won't give you their transaction volume or data in real time like a time and sales feed. They'll only provide tick volume in substitute. Hence my suggestion telling you to look at FX Futures tick charts since they are based on actual volume that's exchange based.

(I feel like I'm starting to repeat myself... )

Quote from k p:


I am eager to compare how the 70 tick chart will look in relation to the 30 second chart. During busy periods it sounds like it will be quite significant and hence why I want to be starting with the best data possible so I'm not needlessly wasting money or learning things the wrong way.

The Pepperstone broker does seem reasonable, but at the same time, Oanda looked good as well. I like their chart that shows the spread over time, where weekends for example are much worse. They state a 1.2 pip spread during the good times, so I will start monitoring next week. Can't for the life of me see any numbers on minimum account size though, but it seems like they say no commission and you're only paying the spread, which being 1.2 during regular market hours seems excellent.

I see many brokers also offer this Meta Trader 4 platform. Is this some fancy charting platform that is offered in addition to what the broker might have custom designed for themselves? I'm familiar with Ninja Trader or Tradestation as options for trading stocks or futures if you don't like the inhouse platform that your broker might use, so is this the same idea for Forex?

MT4 is an 'off the shelf' platform for the front and backend trading requirements of brokers.. so most brokers who offer it do so as their primary platform. Oanda is an exception, since they have their own proprietary platform on the backend and instead add on MT4 as an alternative to access their price feed and execution.

Oanda doesn't have a minimum account size (well, it's 1 unit of currency I think...) and they say 1.2 during the NY London overlap session but it floats around 1.4 ish more often than not, with ~1.8 during less liquid sessions. Pepper comes in slightly better total cost wise, and if you're trading on positions larger than 100k per fill then IB is also as cheap if not cheaper (though with a different tick increment of 0.5 pips instead of 0.1 pips when price changes.)

Neither MT4 or Oanda's fxTrade support tick charts (not sure about IB either.) MT4 has a free 3rd party extension that does it, but again, it would be based on tick volume and thus useless in context of your book. The reason tick charts isn't popular with FX spot platforms should start to seem obvious by now.

(Even if you use a NinjaTrader setup with a broker that supports NT on spot currency, again, tick charts won't be constructed with actual transaction volume..)