No slippage during volatile market conditions

Setharb: Ive been trading stocks for several years , and just recently got into this business.

I think it pay off to choose a good broker from the start and thus maybe save a lot of money,time and energy. But you have to try around to see which one fits you need best.

 

Thanks for the extremely insightful post. I didnt know this much about ECN platforms at all. You obviously take on much more responsibility, but isnt it highly unlikely that a bank would increase its spread to 25, and wouldnt you be informed about that in advance?

 

You’re right, I wasn’t clear, you would most likely know in advance that the spread would widen because it usually happens during on the release of fundamental events. You’ll still get filled, but with a big spread (the spreads tighen up quickly, usually less than 30 seconds). You won’t be informed in advance of anything on the platform so as soon as you have issues call your broker.

Just a note on how they work for anyone reading the thread, your broker will use a standardized platform (currenex is a popular one) to feed in prices and liquidity from several different counter parties. The counter parties are banks who are making a market and make money on the spread. The broker, who performs the back office functions and settles up (but doesn’t take positions), makes money from spread rebates or commissions. So it’s possible to open a position with Bank A and close it with Bank B. One advantage of an ECN is you have some degree of anonymity, the counter parties who execute your trade won’t know your positions. Some also have the option of storing your pending orders locally so no one can see your stops and limits at all.

Generally having more banks is better but in the FX world your access to liquidity is based on your “relationships” (the money you bring in). For that reason the number of banks feeding the platform is only one factor involved, you want to have the large top-tier banks feeding the platform who can handle large sizes, not a collection of tiny players. No broker is going to disclose what the banks feeding their platform are, but generally the larger the broker, the better the banks.

Trader/God