order execution latency.

[garachen]

Really? I didn't know that. I'll admit I know very little about spot FX, but my understanding was that there were seven or so banks that provided a lot of liquidity in FX. Wouldn't they want to have an idea what other spot venues are quoting to prevent someone from arbing them? I would believe you if you told me that a vast majority of the interbank FX trading took place in the forward market or off exchange though.

In FX you typically have the option to turn off trading with counter-parties that you don't want. They wouldn't be able to even see your quotes. Then, a lot of people have "last look" which is pretty much what it sounds like. If someone thinks you are arbing them against other venues you will soon find that you have far fewer people to trade with.

It's a strange game that's very relationship driven. It's all beside the point. No bank system I've ever seen has ever been fast at doing pretty much anything. There's really no reason to be.

 

[cjbuckley4]

In FX you typically have the option to turn off trading with counter-parties that you don't want. They wouldn't be able to even see your quotes. Then, a lot of people have "last look" which is pretty much what it sounds like. If someone thinks you are arbing them against other venues you will soon find that you have far fewer people to trade with.

It's a strange game that's very relationship driven. It's all beside the point. No bank system I've ever seen has ever been fast at doing pretty much anything. There's really no reason to be.

Thanks for your explanation. I've heard the term "last look" thrown around in FX a lot, but never had the initiative to dig up the precise meaning--now it makes sense.

 

[pstrusi]

MARKET VS LIMIT ORDERS ( Latency )

I've been developing strategies for quite some time, and once you have an interesting Backtest, the logic next step would be a real-time simulation, where the critical "filling" orders procedure could be easily, mostly, one of the reasons why remarkable differences found between Backtest and Real-Time.

I've listened several opinions from experts, senior members and my own experience. The conclusions are still general and rather depending on many factors, such as: the market you're trading, the instrument, day's conditions, general liquidity...etc. All of us know the main features and differences between limit and market orders but the practical consequences is what really I try to manage. For example:

- I've seen Strategies working with limit orders ( check against backtest trades ) where 85% are identical but with some "Not filled" ( as expected ), it doesn't sound very bad but unfortunately this might affect the internal continuing logic of calculations and signals ( if day-trading ) besides the overall performance.

- Despite you could have some indicators to detect volatility, still is not predictable a "black swan" or "Fat-finger" that could turn markets insane in secs, so under these conditions of fast and big volatility, limit orders is going to let you down or getting you in troubles.

There are more "naked-truth practical examples" when using limit orders. Now Market orders has its darkside too. If you're trading in not very liquid instrument, market orders, with wide spreads can kill you in hours ( if day-trading of course ), besides you're an easy victim for HFT profit from you.

So, I'd like to know experiences or suggestions regarding to this critical point, I'd highly appreciate your comments.

Thanks in advance