Why FX limit orders within spread unallowed ?

S

saschabr

Hello,

many retail FX shops do not allow the user to submit limit buy or sell orders within or near the current quote.

E.g. if EURUSD is 1.2060 - 1.2064, many firms will not allow the user to submit buy or sell limit orders within 1.2055 - 1.2069.

You can place limits only away from the current mkt by a certain amount.

Does anyone know the reason for that behaviour ? The only thing I could imagine, is to disable the user from taking advantage of small and frequent 1-2 pip moves, and therefore minimizing the effective spread paid.
 
Quote from saschabr:

Hello,

many retail FX shops do not allow the user to submit limit buy or sell orders within or near the current quote.

E.g. if EURUSD is 1.2060 - 1.2064, many firms will not allow the user to submit buy or sell limit orders within 1.2055 - 1.2069.

You can place limits only away from the current mkt by a certain amount.

Does anyone know the reason for that behavior ? The only thing I could imagine, is to disable the user from taking advantage of small and frequent 1-2 pip moves, and therefore minimizing the effective spread paid.
More...

Probably something to do with the fact that retail fx shops take the other side of your trade and are the ones that supply the prices. They can manipulate the prices within a few pips to give their customers bad prices (good prices for the house) and they don't want people scalping against interbank cash prices and talking money from them.
 
So who do you trade with to get around this problem?

I had read something somewhere about an ECN type FX broker, but I don't remember exactly what it was about.
 
Quote from TonySanDiego:

So who do you trade with to get around this problem?

I had read something somewhere about an ECN type FX broker, but I don't remember exactly what it was about.
More...

you mean hotspotFX
they have other drawbacks.
maybe IB starts it's FX operations soon...
 
Currently, I'm training on Oanda's "FXGame", a demo platform which is said to closely mimic the action on their "FXTrade" live platform. Oanda's quoted spreads are the tightest of the retail FX brokers, often as little as 2 pips on the EUR/USD, depending upon market volatility.

I can place limit orders inside the spread, and have done, but the orders would not fill until the market price moved (slightly) outside the spread (against the position I was trying to initiate).

Why try to use limit orders to scalp? You might not get a fill at all, and at any rate you will have to be quite nimble to execute a strategy.

When I use a market order in the FXGame, it executes instantly, and fills at the quoted "bid" for a sell and at the "ask" for a buy. I'm told that, except in "fast market" conditions, that is the experience of those who trade real money live with Oanda. If that is true, it would seem that with such narrow spreads that is about the best one could do. I hope to be able soon to "go live" myself, and see if that is in fact the way it is.
 
Quote from TonySanDiego:

So who do you trade with to get around this problem?

I had read something somewhere about an ECN type FX broker, but I don't remember exactly what it was about.
More...

If you have a small account then you are stuck with retail fx, Hotspot (never used them & don't know much about them), or you can trade futures (especially if you only trade the majors). If you have at least $250,000 then there are other options to look in to like Currenex, FXall, FX Connect, and platforms offered by banks. There are also some places like Fimat that claim to have strait through processing. I haven't used any of these; just putting them out there as a starting place for you to do further research.
 
Frankly, I'm surprised these bucket shops wouldn't WANT limit orders. Usually dealers look upon limits as the most "pick offable" of orders. After all they don't HAVE to fill you until they can lock in the other side. It's not like there's Time & Sales on bucket shop FX trading.

Maybe those firms could start a self regulating agency. BSTER for Bucket Shops Trading and Ethics Reform. Acronym for Bullshiter.
 
very simple reason...non bank spot forex brokers sole purpose is to STEAL as much as possible from unknowing gullible traders who believe that the wide spreads established are necessary!!!!!!!!
 
Quote from saschabr:

Hello,

many retail FX shops do not allow the user to submit limit buy or sell orders within or near the current quote.

E.g. if EURUSD is 1.2060 - 1.2064, many firms will not allow the user to submit buy or sell limit orders within 1.2055 - 1.2069.

You can place limits only away from the current mkt by a certain amount.

Does anyone know the reason for that behaviour ? The only thing I could imagine, is to disable the user from taking advantage of small and frequent 1-2 pip moves, and therefore minimizing the effective spread paid.
More...
I use OANDA live and have never been requoted, I can place a limit order at any time at any price and their server ALWAYS accepts it and ALWAYS fills it instantly as soon as market moves to that price. Prices are executed on the dot all the time. If others are experiencing anything different with other brokers I suggest trying out OANDA.

By the way, their FXGame is identical with their FXTrade account and live even has more benefits.

Keep your trades in proportion to your true account size and you'll do fine.

Cheers and good trade!

coinz
 
Quote from saschabr:

Hello,

many retail FX shops do not allow the user to submit limit buy or sell orders within or near the current quote.

E.g. if EURUSD is 1.2060 - 1.2064, many firms will not allow the user to submit buy or sell limit orders within 1.2055 - 1.2069.

You can place limits only away from the current mkt by a certain amount.

Does anyone know the reason for that behaviour ? The only thing I could imagine, is to disable the user from taking advantage of small and frequent 1-2 pip moves, and therefore minimizing the effective spread paid.
More...

So why not trade the futures? The spread on the EUR future is usually 1 to 2 points, and you can send limit orders between the spread, and set stop orders, or trailing stop orders
While I write this, at a relatively quiet period of the day, (1030pm EST), theres a 1 point spread on GBP; 2pts on EUR, AUD, and JPY; 3 points on CHF and CAD
 
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