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No slippage during volatile market conditions
- Thread starter drasfs
- Start date
Quote from Trader/God:
Yeah, most brokers either are not telling the truth or have a carefully hedged answer about their "guarantee." Drasfs, where did you end up going in the end?
There are some disadvantages to an ECN and it probably varies by broker, some that I've noticed:
1. Technology - You need a decent setup to trade well (well depending on your strategy) on an ECN. The prices can update several times a second so dialup is not going to work.
Most retail platforms have a dealing desk feeding in a price so you can use it with a dialup and you can execute trades with them on the phone if your internet connection cuts out. Many ECN's don't have that option.
2. Spreads - No spread guarantees on an ECN. Its going to be whatever is in the market. So if the spread moves to 25 or if the banks don't feel like feeding in prices well thatâs just tough. A single counterparty on a retail is someone who can take responsibility for a trade and can make sure you will get a feed an execution even if some banks cut out.
There are a few others but if you trade on news, scalp, or trade size then go to an ECN and you will do better. If none of those apply sticking to the safe world of the retail platforms and a sole counter party is probably a good idea. I could go on, but its depends on the trader which platform is better for them.
Trader/God
Trader/God
Thanks for the extremely insightful post. I didnt know this much about ECN platforms at all. You obviously take on much more responsibility, but isnt it highly unlikely that a bank would increase its spread to 25, and wouldnt you be informed about that in advance?
Quote from drasfs:
Thanks for the extremely insightful post. I didnt know this much about ECN platforms at all. You obviously take on much more responsibility, but isnt it highly unlikely that a bank would increase its spread to 25, and wouldnt you be informed about that in advance?
Youâre right, I wasnât clear, you would most likely know in advance that the spread would widen because it usually happens during on the release of fundamental events. Youâll still get filled, but with a big spread (the spreads tighen up quickly, usually less than 30 seconds). You wonât be informed in advance of anything on the platform so as soon as you have issues call your broker.
Just a note on how they work for anyone reading the thread, your broker will use a standardized platform (currenex is a popular one) to feed in prices and liquidity from several different counter parties. The counter parties are banks who are making a market and make money on the spread. The broker, who performs the back office functions and settles up (but doesnât take positions), makes money from spread rebates or commissions. So itâs possible to open a position with Bank A and close it with Bank B. One advantage of an ECN is you have some degree of anonymity, the counter parties who execute your trade wonât know your positions. Some also have the option of storing your pending orders locally so no one can see your stops and limits at all.
Generally having more banks is better but in the FX world your access to liquidity is based on your ârelationshipsâ (the money you bring in). For that reason the number of banks feeding the platform is only one factor involved, you want to have the large top-tier banks feeding the platform who can handle large sizes, not a collection of tiny players. No broker is going to disclose what the banks feeding their platform are, but generally the larger the broker, the better the banks.
Trader/God