I'm evaluating Forex brokers for my market making strategy. I'm testing how Forex brokers execute limit orders on live funded account. Here's an example from Oanda. My sell limit order is sitting inside of the bid/ask spread for over 5 minutes without being executed. I know the order will execute when their bid crosses my ask, but it's hard to think that during US morning hours no Oanda customer or algo placed a market buy order that would benefit from a price improvement within that time range. I know Oanda is not an ECN, so that means they are just plain market maker. So it's my algo against their algo. So if I deploy my model at Oanda, and it's consistently making a profit, they will most likely shut me down by slowing down quotes, or frequently cut my connection, or start rejecting orders, etc... because I'll directly cut their profit. Is my thinking right? P.S. they could start hedging my orders, but since there can be hundreds of orders per day I don't think they want to go with that much hassle. So shutting my algo down would be much less hassle.
Yes, they're just bucket shop. Probably the best one. Oanda doesn't have limit orders, they support market on touch. Do mind the spread is not strictly related to the market spread, but also includes a profit for Oanda... You're not going to be able to do market making on Oanda, I heavily suspect.
lol Rob, there is no price improvement possible. YES, they are a dealer/bucket shop. The definition thereof. You will not get filled unless your order is marketable. The only benefits from trading with Oanda: 1) discrete size. 2) See #1; synthetics. 3) Credit risk = 0
I had very bad experience with Oanda and i m very sure that they are bucket shop, few years back i have shorted USD/INR with small trade size 100,000 to 200000, at that time bid ask spread was normal and when i placed trade of 10,00,000 USD/INR they increase bid ask spread dramatically and slowly and gradually i have to liquidate my position in lose and closed account with them so beware when you trade Exotic currency pair
I am currently with Oanda and I continually get stopped out, only to see the trade go in my favor. It sucks! Is this common? Someone mentioned "Stop Hunting" but is that true?
Oanda doesn't work the way you think it does. Oanda is on the bid and the ask, and your limit orders are simply "market if touched." So you will always cross Oanda's spread. No way around it (but you don't pay a commission). If you want something closer to a "market making" experience, then you need an ECN type exchange like LMAX where you can post marketable limit orders. Even then, there can be shenanigans, and you pay a commission on every filled order.