Not profitable to daytrade, scalp forex?

Discussion in 'Forex' started by Daal, May 7, 2005.

  1. Daal


    Some people are saying that, because of the spread you already come out behind and its difficult to offset this disvantage on the long run yet that doesnt seem to make sense because there is a counterbalancing effect of the almost zero slippage and no commissions, does anyone have any calculation on which situation is worse and how much is worse?(spread vs commisions+slippage)
  2. No commissions? So its absolutely free to trade these? Wow.

    Aren't PIPs commissions? Or am I confused?
  3. Daal


    The 'commisions' are the spread, thats how the broker will make their money, but I'm not sure how it proportionally it compares to equities/futures trading and their costs(account size will probably have en effect on this)
  4. so whats the cost of a normal spread in dollars?
  5. Everest


    trade the euro future on imm cme.


    3 tick spreads scalping is impossible
  6. Hello Folks,

    I am not an expert, but commissions are forever lost no matter what the price does.

    However, I do not agree with irresponsible Forex Dealers advertising "no commission" "great to trade with us" bla bla bla...

    I see spreads as taking the volatility out of the price swings in Forex. If your with a dealer with high spreads you will not see that highest high or lowest low that you might with a lower spread dealer..."Simply put", the higher spread dealer removes some of the trend...

    If you scalping, narrower spreads would be most important in Forex.

    Remember most Forex dealers forbid "picking". This is where you compare quotes from different places and try to "arb them in"...

    For instance at Oanda they have a 1.5 pip spread n the EUR/USD. So if you buy one lot (100,000 units) thats $15.00(roughly calculated) a mini (10,000 units) is a buck and a half...

    Hope this helps.

    Michael B.

    P.S. No PDT rule and Forex seems to trend more and cleaner (and you can leverage it up, if your a gambler)...But you gotta' find an honest Forex dealer/market maker, like IB or Oanda...
  7. Daal


    Well, here are my numbers
    $5000 position size
    If you get a trade with:
    4 Pips you will be down 0.312% which is -$15.6
    If you get 3 pips you will be down 0.2341% -$11.705
    1.5 - Pips - 0.0117096 -$5.85
    Assuming your buying at 1.2809/10 and getting filled as IF your at 1.2813/1.28115, on EUR/USD(I havent considered anything on interest rates)

    In IB
    $5000 - 0.02%(0.0002) -$1

    Now I dont think slippage will be big enough to offset this tremendous difference. And bigger the trade in equities the less you pay but on forex you pay the same. Impossible/not worth it to daytrade it?Isnt this spread a little abusive?(Espcially if you have something like 250K)
  8. Daal


    My math is wrong
  9. Daal


    Ok, I think I got it right now
    Buying at 1.2810 and getting filled as if it was at 1.28115(1.5 pips, best case) the is loss of -0.0118%(1.28115 * 100/1.2810). Which is -$0.59 on $5000. For 4 pips, it would be -0.0312%, is -$1.56. But I'm no math genius so can anyone confirm if this is accurate?If it is, why people bitch about the spreads so much?
  10. Another thing to note:

    At Oanda its is not really streaming flowing quotes, its more like an Interactive broker type of quote, but much slower. What I mean, it is a 5 second snapshot type of quote...

    I just thought you scalpers would want to know...also as you know there is not any volume indicators in Forex, but some clever traders use pip frequency...(but at Oanda that may be jaded)

    Michael B.
    #10     May 7, 2005