Short time frame (5min) Forex trading - What broker to go with?

M

mangolassi

Hey everyone,

I am looking to open a live account with a forex broker for day trading on short time frame charts using price action methods. How true is it that retail forex brokers (like Oanda, FXCM, etc.) actually manipulate the prices and then stop out customers in trades and take the winning side of the trade? Wouldn't this make scalping and day trading an extremely difficult thing for the forex traders?

Are there brokers that don't do this? I was going to go with Oanda, but after reading some of the reviews about this sort of thing, I'm hesitant. Funny thing is, I'm reading conflicting information about all these brokers. For example, some people say Oanda bets against their customers, while others say Oanda doesn't do that.

Mango
 
mangolassi said:
Hey everyone,

I am looking to open a live account with a forex broker for day trading on short time frame charts using price action methods. How true is it that retail forex brokers (like Oanda, FXCM, etc.) actually manipulate the prices and then stop out customers in trades and take the winning side of the trade? Wouldn't this make scalping and day trading an extremely difficult thing for the forex traders?

Are there brokers that don't do this? I was going to go with Oanda, but after reading some of the reviews about this sort of thing, I'm hesitant. Funny thing is, I'm reading conflicting information about all these brokers. For example, some people say Oanda bets against their customers, while others say Oanda doesn't do that.

Mango
More...

Hi Mangolassi,

Welcome to Elite Trader! :)

While I can't speak for other brokers, FXCM provides you with No Dealing Desk (NDD) forex execution. That means we don't take the market risk on the other side of your trades. Instead, we offset each of your orders one-for-one with the best prices being quoted from among 10+ competing liquidity providers. We make our money from your trading volume, not your losses. That makes scalpers some of our best clients, because of the trading volume they generate.

Furthermore, your profits do not mean a loss for us. Therefore, it's in our best interest to provide you with the best execution possible. An example of this fact, is how FXCM allows you to benefit from positive slippage whenever it's available. Positive slippage is when your order is filled at a better price than you requested, while negative slippage is when your order is filled at a worse price than you requested.

It's important to note that to this day, some brokers may still not provide positive slippage to their clients, while others may provide positive slippage on some order types, but don't provide it on other order types. Some brokers may re-quote their clients when the price moves in their clients' favor but fail to re-quote when the price moves against them. By contrast, there are no re-quotes at FXCM, and our clients receive the full benefits of any positive slippage that's available.

Below are the data from a total of 43,128,901 trades executed through FXCM over a six month period from August 2013 to January 2014. In those 6 months alone, FXCM clients benefited from over $15 million in positive slippage.
  • 73% of all orders had no slippage.
  • 15% of all orders received positive slippage.
  • 12% of all orders received negative slippage.
  • Over 60% of all limit and limit entry orders received positive slippage.
  • 53.32% of all stop and stop entry orders received negative slippage.
Notice how positive slippage is more common with limit orders, while negative slippage is more common with stop orders. That's due to the momentum of price movement when such order types are triggered. It's worth adding that the Market Range feature on our Trading Station platform and the Enhanced* Maximum Deviation feature on our MT4 platform allow FXCM clients to limit the amount of negative slippage they receive, while still enjoying the full benefits of any positive slippage that's available.


PS: Mango lassi is one of my favorite drinks! :D


* On the MT4 platforms of some other brokers, the Max Dev feature is unavailable, or if it is available, then it will limit both your negative slippage and your positive slippage equally. By contrast, FXCM enhanced how Max Dev works on our MT4 platform allowing you to limit your negative slippage while still enjoying the full benefits of any positive slippage.
 
Oanda is a MM and everybody knows that. If you are OK with their dynamic spreads and spread widening during the news (20 pips on majors and 40-100 on crosses) - go with it. I don't think Oanda is good for scalping, but if you want to trade with 50-100 dollar account - they are OK.
FXCM - not matter that Jason say about them - same MM as Oanda. Even worse, as they get fines every couple of years.
For scalping and day trading - I would recommend Lmax. It's just my personal experience.
 
syntheticjunkie said:
FXCM - not matter that Jason say about them - same MM
More...

You are mistaken, Syntheticjunkie

Unlike other brokers you mentioned, FXCM is regulated in multiple jurisdictions across 4 continents. We are also a publicly-traded company (NYSE ticker: FXCM). That means we could not say we offer No Dealing Desk (NDD) forex execution on our websites, trading agreements or even this forum unless it was really the case. Our position as one of the largest firms in the industry means we are under a greater amount of scrutiny, and we appreciate that responsibility. FXCM believes in leading the way in transparency. Our new raw FX spread pricing model is just the latest example: http://bit.ly/1shNooZ
 
Thanks for the info, Jason. I may just stick with equities for now, and look into forex later. FXCM will definitely be a broker I will look into if I decide to get into currency trading.

Thanks to you too, synthetic.
 
some may still manipulate prices, and others not. FXCM was a champion in ripping off its own customers. Now they state they run an ECN or NDD model, which I never verified because they still rip off clients through their insanely wide spreads.

Take a look at other retail brokers such as Interactive Brokers, DukasCopy, Lmax. If you cannot afford the minimum funding requirements then you should not trade. (I know you wont take this specific advice in case you fall into this category but I nonetheless warned you!).

In any case stay away from brokers that charge >0.5 pip spreads in USDJPY, EURUSD, and FXCM clearly fails this simple filter!!!


mangolassi said:
Hey everyone,

I am looking to open a live account with a forex broker for day trading on short time frame charts using price action methods. How true is it that retail forex brokers (like Oanda, FXCM, etc.) actually manipulate the prices and then stop out customers in trades and take the winning side of the trade? Wouldn't this make scalping and day trading an extremely difficult thing for the forex traders?

Are there brokers that don't do this? I was going to go with Oanda, but after reading some of the reviews about this sort of thing, I'm hesitant. Funny thing is, I'm reading conflicting information about all these brokers. For example, some people say Oanda bets against their customers, while others say Oanda doesn't do that.

Mango
More...
 
that may all be true, but can you enlighten us then why you charge massive amounts of money via spreads? Can you offer 0.3 pip spreads in USDJPY, 0.3 pip spreads in EURUSD, 0.6 pip spreads in GBPUSD? I am very curious, maybe I have missed the last round of tech upgrades on your firm's end and your CEO is nowadays filling his coffers in other ways...

p.s.: Mentioned spreads are all going practice at Interactive Brokers, DukasCopy, LMAX. Fact remains that anyone who trades at 1-2 pip wide spreads in mentioned currency pairs already lost the game before he even started. And please do not mention that it impacts long-term holdings only minimally. Cheaper is always better correct?


Jason Rogers said:
Hi Mangolassi,

Welcome to Elite Trader! :)

While I can't speak for other brokers, FXCM provides you with No Dealing Desk (NDD) forex execution. That means we don't take the market risk on the other side of your trades. Instead, we offset each of your orders one-for-one with the best prices being quoted from among 10+ competing liquidity providers. We make our money from your trading volume, not your losses. That makes scalpers some of our best clients, because of the trading volume they generate.

Furthermore, your profits do not mean a loss for us. Therefore, it's in our best interest to provide you with the best execution possible. An example of this fact, is how FXCM allows you to benefit from positive slippage whenever it's available. Positive slippage is when your order is filled at a better price than you requested, while negative slippage is when your order is filled at a worse price than you requested.

It's important to note that to this day, some brokers may still not provide positive slippage to their clients, while others may provide positive slippage on some order types, but don't provide it on other order types. Some brokers may re-quote their clients when the price moves in their clients' favor but fail to re-quote when the price moves against them. By contrast, there are no re-quotes at FXCM, and our clients receive the full benefits of any positive slippage that's available.

Below are the data from a total of 43,128,901 trades executed through FXCM over a six month period from August 2013 to January 2014. In those 6 months alone, FXCM clients benefited from over $15 million in positive slippage.
  • 73% of all orders had no slippage.
  • 15% of all orders received positive slippage.
  • 12% of all orders received negative slippage.
  • Over 60% of all limit and limit entry orders received positive slippage.
  • 53.32% of all stop and stop entry orders received negative slippage.
Notice how positive slippage is more common with limit orders, while negative slippage is more common with stop orders. That's due to the momentum of price movement when such order types are triggered. It's worth adding that the Market Range feature on our Trading Station platform and the Enhanced* Maximum Deviation feature on our MT4 platform allow FXCM clients to limit the amount of negative slippage they receive, while still enjoying the full benefits of any positive slippage that's available.


PS: Mango lassi is one of my favorite drinks! :D


* On the MT4 platforms of some other brokers, the Max Dev feature is unavailable, or if it is available, then it will limit both your negative slippage and your positive slippage equally. By contrast, FXCM enhanced how Max Dev works on our MT4 platform allowing you to limit your negative slippage while still enjoying the full benefits of any positive slippage.
More...
 
I stand corrected, you do indeed offer a "new" model that offers tighter spreads plus commission. BUT: USD $4 for 100k orders? That is INSANE. Standard practice is around USD 2.50 (per 100k order) and can go as low as $1.2 per 100k if one trades larger volume. The only way I see your offer as competitive is for someone who trades smaller than 40k orders. Maybe you should make that clear. For any larger order size you are utterly uncompetitive in terms of pricing.

PS: And above only applies to a very small number of pairs. For all other pairs you charge USD 6 per 100k. WOW. Talk about hanging oneself before even starting out.

Jason Rogers said:
You are mistaken, Syntheticjunkie

Unlike other brokers you mentioned, FXCM is regulated in multiple jurisdictions across 4 continents. We are also a publicly-traded company (NYSE ticker: FXCM). That means we could not say we offer No Dealing Desk (NDD) forex execution on our websites, trading agreements or even this forum unless it was really the case. Our position as one of the largest firms in the industry means we are under a greater amount of scrutiny, and we appreciate that responsibility. FXCM believes in leading the way in transparency. Our new raw FX spread pricing model is just the latest example: http://bit.ly/1shNooZ
More...
 
volpunter said:
I stand corrected, you do indeed offer a "new" model that offers tighter spreads plus commission. BUT: USD $4 for 100k orders? That is INSANE.
More...

Hi Volpunter,

I'm glad you like our raw FX spreads.

As you mentioned yourself, FXCM's account opening minimum of $2000 makes our services accessible to a larger number of retail traders than the alternatives you mentioned. That's something to keep in mind when you look at our commissions. It's also worth noting that high volume traders can get access to lower commissions by contacting our Private Client Group.

Something to else to consider is that unlike most brokers that use a spread+commission pricing model, FXCM has the same commission per lot regardless of the base currency of the pair you trade. That means while other brokers may charge you about 60% more in commission to trade GBP-based pairs like GBP/USD and GBP/JPY compared to USD-based pairs like USD/JPY and USD/CHF, we charge the same commission per lot for all of these currency pairs. That's helpful especially if you frequently trade GBP-based pairs or EUR-based pairs like EUR/USD and EUR/JPY.
 
fair points, and I appreciate your disclosure and mentioning that pricing wise your offer makes sense to those, only, who trade smaller size (I calculated and came up with around 40k USD notional equivalent as breakeven on average). For larger order sizes your offering is not competitive.

But out of curiosity, what is the funding minimum and volume tiers to get commissions down to, let's say, below 2 USD per 100k USD notional traded? I am very curious. There should be a straight forward answer, IB can provide this answer in public space, so can DukasCopy, so can LMAX and a number other reputable brokers. I do not want to contact your desks to hackle out some sort of "deal" that prices each customer differently. I might consider digging deeper and express interest if you can point me to a commission schedule that offers commissions below USD 2.5 per 100k USD notional traded, given it will be executed and filled on your "raw FX spreads" feed. Of course I would need to know which liquidity providers you utilize and would need to test how the pricing dynamics look like around economic news releases or during times of higher volatility and especially would need to investigate slippage statistics.

Jason Rogers said:
Hi Volpunter,

I'm glad you like our raw FX spreads.

As you mentioned yourself, FXCM's account opening minimum of $2000 makes our services accessible to a larger number of retail traders than the alternatives you mentioned. That's something to keep in mind when you look at our commissions. It's also worth noting that high volume traders can get access to lower commissions by contacting our Private Client Group.

Something to else to consider is that unlike most brokers that use a spread+commission pricing model, FXCM has the same commission per lot regardless of the base currency of the pair you trade. That means while other brokers may charge you about 60% more in commission to trade GBP-based pairs like GBP/USD and GBP/JPY compared to USD-based pairs like USD/JPY and USD/CHF, we charge the same commission per lot for all of these currency pairs. That's helpful especially if you frequently trade GBP-based pairs or EUR-based pairs like EUR/USD and EUR/JPY.
More...
 
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