How do Big Banks - that provide liquidity to Institutional ECN's like Currenex or Hotspot - define "scalping"? The question is not posed toward retail bucketshops as their interpretation is obvious and self-serving. How many pips profit? Stop? Average hold time? Primarily news-trades? What is key criteria? And secondly, why would Big Banks care if a trader scalped or not? A true ECN shouldn't avail major Banks to anymore risk then they willingly take on themselves (by quoting a bid or ask)? Help a brother out.
they don't do it. typical bank prop trader uses a six figure stop loss and aims for 6 figure profit. scalping is out of the question. they refer to the money they make from bid offer spread as a chop generally. most banks have algo programs that scalp using systems, but they are ancillary to the long term stuff.
AFAIK, IB IDEALPRO liquidity providers (major banks) do not care if you are scalping for a couple ticks. It is a true ECN model I believe. It is the most honest offering I have come across in the FOREX world. Best regards, MK
Danger66 comments prompted my question: "Thanks, Nick. You're right. Their head guy is Frank Conlin (spelling?). I spoke to him today. He was telling me that even when you scalp on Currenex, there's a chance that one big bank will be at the best price a lot. If you hit that bank a lot of times, they might ask the FCM to kick your ass out. That's why it is better to combine multiple liquidity sources. Who knows. Sounds good anyway. Maybe it was just a pitch for their system. If anyone else knows anything about these guys, please post." http://www.elitetrader.com/vb/showthread.php?threadid=76928&perpage=6&pagenumber=1 If there is any truth to this, id like to explore it.
The sell-side refers to "it" as being "picked-off". They earn the bulk of their profits from market-making, so they're quick to cut you off if they determine they're losing consistently against a customer #.
Okay, lets see if i got this straight. Big banks sometimes make markets where none exist - therefore quoting on a bid/ask that may not be reflective of current price or projected direction. When a trader consistently 'hits' these extreme quotes they're flagged as abusive. What I dont understand - under an ECN type environment, why would a major bank feel compelled to: a) make a market b) quote extremes bid/ask that are ripe for arbitrage. Is there any truth to that?
Are you 100% sure about this? A true ECN offers the ability to be filled on the bid/ask if you're the next liquidity provider in line when an order comes in at your price. I'm not sure whether the banks will fill your buy order on the bid through IdealPro. Hotspot FXi prominently advertises this specific feature on their site, but it's not directly defined on IB's site.
They wouldn't intentionally quote an outlier. They make markets to game the spread. Regardless, they need paper to offset, or a ready replication. There is an assumption of soft-dollar edge in that the counterparty is an idiot and there is edge implied in taking the other side of the transaction.