spread question
- Thread starter alanack
- Start date
1) Instead of thinking about the "spread", it may be better/easier to think about "getting the edge on the spread".
2) For example, if the YM is "50 bid, offered at 51", it's possible that the same trader, i.e. Trader-A, is bidding AND offering those prices at that moment. If you hit the 50-bid and another trader quickly takes the 51-offer, Trader-A will have "collected the spread" of one tick. If Trader-A is 50-bid and another trader, i.e. Trader-B, is offering at 51, Trader-A will "have the edge" by paying 50 on his trade and Trader-B will "have the edge" on his sale at 51. You "gave up the edge" when you sold at 50 and the other trader did the same by paying 51.
Quote from nazzdack:
1) Instead of thinking about the "spread", it may be better/easier to think about "getting the edge on the spread".
2) For example, if the YM is "50 bid, offered at 51", it's possible that the same trader, i.e. Trader-A, is bidding AND offering those prices at that moment. If you hit the 50-bid and another trader quickly takes the 51-offer, Trader-A will have "collected the spread" of one tick. If Trader-A is 50-bid and another trader, i.e. Trader-B, is offering at 51, Trader-A will "have the edge" by paying 50 on his trade and Trader-B will "have the edge" on his sale at 51. You "gave up the edge" when you sold at 50 and the other trader did the same by paying 51.
Thanks. So there are no market makers scalping, as in stocks, I see... What about limit orders? A limit order to buy at the bid, I guess, might get filled, or might not, depending on who gets to it first?
You have to experience:
a) the aggravation of the market trading at your limit price while you are too far back in the queue to get filled and missing a great trade.
b) the satisfaction of getting filled on a limit order at the exact extreme of a retracement and having a large profit occur quickly.
c) the "market tuition" of being filled on a limit order and the market instantaneously moves to your protective-stop order for a quick loss because you thought you were a "genius" for choosing the trade entry.
It's first come first serve. So if you put your order to buy on the bid, then you have to wait your turn. More often than not, price will go through the bid for you to get filled.
With stock market makers don't collect money from the spread. They collect the fee that you pay for draining liquidity out of the asset. The fee goes to them because they're providing liquidity.
I think you're confusing the spread in the stock market and futures market with the forex market. They're entirely different things.
With stock market makers don't collect money from the spread. They collect the fee that you pay for draining liquidity out of the asset. The fee goes to them because they're providing liquidity.
I think you're confusing the spread in the stock market and futures market with the forex market. They're entirely different things.
Love it !
Yes, in terms of "collecting the bid-ask spread" the days of buying bids and selling offers are a distant memory. On the screen, at least in the flat price individual instrument markets, the best bids or offers trade out completely in milliseconds. The days of pure scalping manually using a mouse are long gone. Many think that automated scalping is gone for that matter. There is a lot of order book gaming and spoofing and flipping going on. But even the "flippers" working on the best bids or best offers got their asses handed to them eventually. Last good one was in the Eurex Schatz and he disappeared several years ago - not a sustainable strategy.