Lol yes. Even if their rep posts some stuff about HFT while offering platform with regular MT4, connection waaaay slower.
Can a spread widen to 200 pips?
- Thread starter Mattforex
- Start date
Lol yes. Even if their rep posts some stuff about HFT while offering platform with regular MT4, connection waaaay slower.
yeah its a bit like finding out your girlfriend has cheated on you. better to gtfo of there and not return because a hoe is a hoe lol.
Very sensible. Of course it's always easier to see in retrospect, but... it's incredible a firm with the scope and scale of FXCM didn't have a seasoned FX risk professional on staff at the time of the SNB event. "Don't accept levered bets on pegged currencies" is kindergarten-level risk management.
All I know yesterday was sligthly thin market; due to low trading volume. Crosses like AUDCAD can have wide spreads sometimes.
Spread widening is a common issue on Forex; and on any market that have experienced temporary disorder; such as market makers withdrawing their bid/ask orders.
If you are using market orders; then that is your main problem. You should always use limit orders; in order to avoid that kind of spread widening.
I do agree; that majority of retail FX brokers are scammers. They like you when you are losing money; and once you start making money with them; they tweak their machines against you. Suddenly you will start seeing slow execution, high slippage, etc.
That does not mean trading forex is bad. Just look for the right place to trade. ECNs are the best place to start with.
Avoid market makers; and last look brokers at all costs. Those are thieves. If I were Trump; i will jail them or send them to Cartels in Mexico.
Jason; I much prefer this environment (the futures markets where market makers has speed advantage) to the retail FX scam brokers.
Beleive me; nothing beats a fair market where all bids and asks are REAL; and hitting them will result in execution.
In Forex; the last look (aka Re-Quotes) means the market maker can reject your market order; if they know who you are; and if you have hit them before; they will put you on a *black list*
Jason Rogers
ET Sponsor
Hi Birzos,
In major financial centers around the world, retail forex is regulated by many of the same government bodies that oversee other financial markets. For example, in the US, forex brokers are regulated by the CFTC and NFA, the same two bodies that oversee futures trading on the CME. In fact, the capital requirements for forex brokers are higher than for futures brokers:
- $20 million minimum for forex brokers (AKA Retail Foreign Exchange Dealers) https://www.nfa.futures.org/nfamanua...%201&Section=7
- $1 million minimum for futures brokers (AKA Futures Commission Merchants) https://www.nfa.futures.org/nfamanua...2011&Section=7
If you believe there was an error in the execution of a trade with a regulated forex broker, you can file a trade inquiry with them to investigate what happened. If you are not satisfied with their response, you can follow up with their regulator just as you would with a regulated futures broker.
Jason Rogers
ET Sponsor
Hi Doggyfx,
Your comment confirms my earlier point. There's a significant difference in the trading environment at the institutional level compared to the retail level (particularly at FXCM with our NDD execution). Trading activity in venues like the CME (FX futures), EBS and Reuters, is primarily dominated by high frequency traders (HFTs) and similar highly sophisticated market makers who can act as both price makers and price takers. This means that one super-fast HFT can take prices from another super-fast HFT. Because you have these highly sophisticated participants interacting with each other, the trading environment has become one focused on trading speed.
Why is there an extreme focus on speed of trading? You can think of a trade involving 3 steps: receiving market data, making a trading decision, and transmitting the order to the exchange or trading venue. An institutional participant spends millions of dollars on fast access to market data, super fast computing such as FPGA chips, and order transmission such as collocation with the exchange servers. The speed in which they are trading is measured in milliseconds if not nanoseconds. Virtu, one of the top market makers in the financial markets, spent $68 million last year (according to their 10k) on communication and data processing which includes co-location and connectivity to data centers and exchanges, market data, etc. In a trading venue filled with these super‐fast traders, the slowest person loses the race to be the first to trade.
Contrast this to the average retail trader and the steps they may take to make a trade. First market data is more likely to be received using internet speeds offered by cable or phone providers that pale in comparison to microwave towers, dedicated fiber optic cables, and co-located servers used by institutional traders. Next, the trader processes this information analyzing the chart, watching the number being released on CNBC, etc. whether to buy or sell which is probably going to take at least a second or two. And finally, the trader manually clicks the platform and transmits the order back to the exchange over a regular cable or DSL internet connection.
The retail trader takes a figurative eternity to place an order the institutional liquidity provider can complete in microseconds. Even if you and the institutional trader saw the same price at the same time, the race to trade on that price would be like racing a minivan versus a fighter jet and that is probably being generous. What this all means is that it factors into slippage and execution that could impact your trading P/L.
This isn’t to suggest that FXCM is better than any one venue. To their credit, institutional venues such as the CME, Reuters and EBS provide a valued service in the FX industry and are excellent option for institutional traders. Our liquidity providers require them to trade otherwise they would not be able to make markets for FXCM's retail clients or their own clients. The transparency of pricing and market data on the CME sets a standard for global trading which many FX market participants look to as a benchmark. However, it’s important to realize how different customer segments are better suited for different venues.
Jason Rogers
ET Sponsor
Hi Alfa,
There is a third alternative. You can trade with a regulated forex broker that provides you with NDD execution where each of your orders is offset one-for-one with the best prices from competing liquidity providers. Then you would also have the flexibility to one micro lot (1000 currency units risking 10 cents per pip) or any multiple thereof with access to the same NDD liquidity available to larger traders.
This is in contrast to FX futures where the smallest E-micro contracts require you to place trade sizes over ten times larger (12,500 currency units or $1.25) and limit you to a liquidity pool that is over 80 times smaller than what's available for standard FX futures*. Plus the number of currency pairs available to trade with E-micro FX contracts is limited as well.
* Based on data from December 24, 2015 to January 26, 2016 showing that average daily notional E‐micro trading volume makes up a mere 1.1% of total EUR/USD futures volume and E‐mini trading volume makes up only 1.4% of total EUR/USD futures volume