RefcoFX vs. Oanda

[TradingWise]

Quote from Chood:

P.S. I added that the add-ons (news, tools, etc.) the dealers offer on their platforms also are lures.

Transactions costs are hugely lower with futures, by a factor as much as ten in my experience. Next, consider what "liquidity" means. With a dealer, you have NO liquidity. The dealer is your single source for entry and exit, with your menu of choices at all times dictated by the quotes the dealer makes for you (or refuses to make). That explains platforms frozen or blanked at news, or limit orders dishonored, and spikes run to stops. Obviously, those results come not from access to some titanic river of globalized forex transactions, or even from a modest confluence of multiple streams of buyers and sellers.

Your claims are factually incorrect. Spot fx transaction costs are very competitive compared to futures if not better running as low as 1-2 pips on the majors. Liquidity is often guaranteed up to a certain amount (far in the millions at many dealers). The integrity issue remains as you state correctly; though good dealers are out there (including Oanda).

Next to this other advantages of spotFX to consider.

Choice from many pairs, not only USD crosses.
Very small account size possible.
Small increments, not only large lots.
Transaction cost are proportional to trade size (no commissions), you can be profitable at any size.
SpotFX dealers often offer an integrated package; charts, execution, news in one.

 

[Chood]

Quote from TradingWise:

Your claims are factually incorrect. Spot fx transaction costs are very competitive compared to futures if not better running as low as 1-2 pips on the majors. Liquidity is often guaranteed up to a certain amount (far in the millions at many dealers). The integrity issue remains as you state correctly; though good dealers are out there (including Oanda).

Next to this other advantages of spotFX to consider.

Choice from many pairs, not only USD crosses.
Very small account size possible.
Small increments, not only large lots.
Transaction cost are proportional to trade size (no commissions), you can be profitable at any size.
SpotFX dealers often offer an integrated package; charts, execution, news in one.

What's factually incorrect? Transaction costs are many times higher if you trade packaged crosses of the dealers, say EUR/AUD at 15, 18, or even 20 pips spread (which are usual), compared to making the same cross with futures in EUR/USD, AUD/USD (four of one, five of the other). I know that as a factual matter because I've paid the costs in both scenarios. As for 1-2 pips in "majors," that claim ignores the dealer's spread-shifting to exploit its net position against customers. Or do you suppose the dealer is going to quote against itself? 1-2 pips is the advertised spread, in other words, but not what in actuality any customer pays. Remember, the trade isn't over until exit.

Lastly, and most importantly, you do not understand liquidity. Liquidity, as a fact, means access to a market in depth of multiple sellers/buyers. A fx dealer is exactly the opposite. With a dealer, you are completely captive to the quotes it is willing to provide. Put another way, you have only as much liquidity, or as little liquidity, as the dealer is willing to provide. You can't sell to anybody the quote you brought from it, that's for sure, or buy from anybody the quote you sold it.

 

[TradingWise]

Quote from Chood:

What's factually incorrect? Transaction costs are many times higher if you trade packaged crosses of the dealers, say EUR/AUD at 15, 18, or even 20 pips spread (which are usual), compared to making the same cross with futures in EUR/USD, AUD/USD (four of one, five of the other). I know that as a factual matter because I've paid the costs in both scenarios. As for 1-2 pips in "majors," that claim ignores the dealer's spread-shifting to exploit its net position against customers. Or do you suppose the dealer is going to quote against itself? 1-2 pips is the advertised spread, in other words, but not what in actuality any customer pays. Remember, the trade isn't over until exit.

Lastly, and most importantly, you do not understand liquidity. Liquidity, in its positive sense, means a market in depth of multiple sellers/buyers. A fx dealer is exactly the opposite. With a dealer, you are completely captive to the quotes it is willing to provide. Put another way, you have only as much liquidity, or as little liquidity, as the dealer is willing to provide. You can't sell to anybody the quote you brought from it, that's for sure, or buy from anybody the quote you sold it.

SpotFX allows you to trade the pair directly, without creating a synthetic pair with spreads as low as 8 pips for EUR/AUD in your example.

If the broker is fair, the net exposure will be offset. That means the dealer holds no interest in the opposite side of your position. I know you don't trust claims made by spotFX brokers, but that's your problem. Some really invested in their reputation and act accordingly to customers.

-Put another way, you have only as much liquidity, or as little liquidity, as the dealer is willing to provide.- Exactly, and many guarantee up to 10 million size at ANY offered rate without requotes.

 

[late apex]

Quote from TradingWise:

Your claims are factually incorrect. Spot fx transaction costs are very competitive compared to futures if not better running as low as 1-2 pips on the majors. Liquidity is often guaranteed up to a certain amount (far in the millions at many dealers). The integrity issue remains as you state correctly; though good dealers are out there (including Oanda).

Next to this other advantages of spotFX to consider.

Choice from many pairs, not only USD crosses.
Very small account size possible.
Small increments, not only large lots.
Transaction cost are proportional to trade size (no commissions), you can be profitable at any size.
SpotFX dealers often offer an integrated package; charts, execution, news in one.

Very well put.

Other spot forex advantages, relevant to some players:

- offers true 24/7 market (Oanda), 24/6 (others). The world business and politics doesn't take an hourly break from 5-6 pm every day, nor for 45 hours on weekends.

- no quarterly rollovers to deal with in 1) longer term charts and 2) testing

- precise Fixed Fractional or Fixed Ratio (and their variations) money management possible

- more flexible tax treatment (in the US)

- the only way to get decent size (1M++) done without slippage, outside Euro and outside US morning session.

- arbitrage strategies possible

- carry trade opportunities

- no need to put all your eggs in one basket, the Merc.

 

[tomcole]

If your hero Oanda is open 24/7/365, why not gun their market (as no one else is open for them to trade with or offset) on a Saturday night / Sunday morning and hit all the stops or force margin calls on naive customers? That forces Oanda to cover from you, the customer, right?

If its an automated system as many claim, your intentionally directional trading will force them to run into stops.

Anyone tried this?

 

[late apex]

Quote from Chood:

What's factually incorrect?
...

Chood, some of us understand and can relate (and strongly sympathize) that your first-hand experience with Saxo Bank was, oh, less than pleasant. No argument there; I had an experience not unlike yours that cost me thousands of dollars in one day (a Sunday, no less), with another large, well-known bucketshop, err, market maker. You know what? That MM will never again have, shall we say, the pleasure of my company. From my perspective, their ultimate loss is a couple of orders of magnitude greater than mine. (Sweet revenge.)

Where I must disagree with you is when you extrapolate from a single, albeit extremely negative, experience, to virtually an entire industry, without any factual basis. I'm afraid that's a classic generalization fallacy.

While many traders will have perfectly valid reasons to choose currency futures over spot forex, that remains an individual choice. Between Oanda and the half-dozen ECNs, there're more than enough reputable dealers to choose from for those who prefer spot, either by itself or coupled with futures.

 

[Chood]

Quote from late apex:

Very well put.

Other spot forex advantages, relevant to some players:

- offers true 24/7 market (Oanda), 24/6 (others). The world business and politics doesn't take an hourly break from 5-6 pm every day, nor for 45 hours on weekends.

- no quarterly rollovers to deal with in 1) longer term charts and 2) testing

- precise Fixed Fractional or Fixed Ratio (and their variations) money management possible

- more flexible tax treatment (in the US)

- the only way to get decent size (1M++) done without slippage, outside Euro and outside US morning session.

- arbitrage strategies possible

- carry trade opportunities

- no need to put all your eggs in one basket, the Merc.

That's some good Kool Aid they're serving. With so many good opportunities from one vendor, why don't you favor us with one trade, posted ahead of time, measurable against your dealer's actual quotes? Us mortals could use it.

P.S. Just how many Oandians do you reckon are in brackets to benefit from tax flexibility, which, if I recall correctly, involves treatment only of loss, not also profit?

 

[late apex]

Quote from tomcole:

If your hero Oanda is open 24/7/365, why not gun their market (as no one else is open for them to trade with or offset) on a Saturday night / Sunday morning and hit all the stops or force margin calls on naive customers? That forces Oanda to cover from you, the customer, right?

If its an automated system as many claim, your intentionally directional trading will force them to run into stops.

Anyone tried this?

Interesting idea. (I say this without any hint of sarcasm or irony.) Well, there's that pesky 10M trade limit with Oanda...

You could submit separate, sequential trades of 10M each. At current levels, you'd need around USD 240K margin for each (for, say, EUR/USD). Are you going to run out of margin before their internal risk mgmt. system kicks in and prevents you from entering more trades? I have no idea.

And if their system is not designed to lock you out at some point, wouldn't you need an account size comparable (as in within an order of magnitude) to the combined assets of all their clients? That's not feasible.

Also, it should be noted that while Oanda's interface is 100% automated, human traders still monitor it live, in real time. Weekends, too? Again, don't know, but it wouldn't particularly surprise me.

 

[late apex]

Quote from Chood:

That's some good Kool Aid they're serving. With so many good opportunities from one vendor, why don't you favor us with one trade, posted ahead of time, measurable against your dealer's actual quotes? Us mortals could use it.

Sorry, Chood, you've lost me here. What does posting one of my trades in advance have to do with anything, within the context of this thread?

Quote from Chood:

P.S. Just how many Oandians do you reckon are in brackets to benefit from tax flexibility, which, if I recall correctly, involves treatment only of loss, not also profit?

You recall correctly. Since most traders lose, in any given year, the answer would presumably be "lots", Oandians and otherwise.

Incidentally, let's get one thing clear here: I have absolutely no reason or incentive whatsoever to recommend or otherwise promote Oanda or anyone else. They are merely one of several brokers I currently use, for both spot and futures. Each chosen solely with my self-interest in mind, no more and no less. (Yeah, I'm strange that way.) Which is how, I believe (surprise), everyone should choose who they are going to conduct their trading business with.

 

[eagerbeaver]

Quote from late apex:

Sorry, Chood, you've lost me here. What does posting one of my trades in advance have to do with anything, within the context of this thread?



You recall correctly. Since most traders lose, the answer would be "lots", Oandians and otherwise.

Incidentally, let's get one thing clear here: I have absolutely no reason or incentive whatsoever to recommend or otherwise promote Oanda or anyone else. They are merely one of several brokers I currently use, for both spot and futures. Each chosen solely with my self-interest in mind, no more and no less. (Yeah, I'm strange that way.) Which is how, I believe (surprise), everyone should choose who they are going to conduct their trading business with.

So, to bring it back to the original question ... what led you to choose Oanda over, say, Refco? Or whomever else you considered?