why cant a trader then open up a few accts with the spot FX " retail dealers" ... and watch the futures and the spread between them .. .and when any one of the "retail dealers" do this mysterious "spike" fade them using futures to hedge if needed until the spot price is back in line ?
Essentially, I think the problem (scam, or whatever you want to call it) is that the Forex broker is taking the other side of your trade. Forex may be the "largest market," but that's all b.s. marketing copy. The Forex brokers each create their own mini-Forex market with their own customers. So not only are the Forex brokers taking the other side of your trade, they also know everything else about your trade, like where you entered your stops. My advice to others thinking about Forex trading is to understand this dynamic of the Forex market. Understand that the deck really is stacked against you. I traded Forex in small lots. Over a nine month period, I turned $4500 into a little over $5000. I figure Refco screwed me out of probably another $300 to $400. But in general, I'm happy with the experience. This was my first experience in trading. I thought I learned a lot. I tried many different things. And I met my expectation, which was NOT to lose money. Mission accomplished. If you're starting out, I think Forex is a good learning experience for newbies. You can open an account with little capital, experiment with technical analysis, and trade while keeping your day job. Don't think you'll get rich trading Forex and you'll be fine. If you're an experience trader and you have real money to trade with, I just think you should be trading currency futures.
The spikes aren't 30 pip massive skyscrapers. What happens is that when the market comes within or 12 to 15 pips of you, suddenly you find you've been stopped out. Not everytime but enough. Want to know what's really disgusting? (This has happened to me a half dozen times this year.) The "spike" half the time doesn't even show up on the chart!!! How insulting is that??!!! I mean for crying out load!! I may be an idiot but I'm not a total farm animal!!!
SethArb, Are you sure your fade would fill on that spike? Here's a witty illustration started by another member (with my embellishment) in an older thread: --------------------------------------------------------- Quote from Equalizer: * * * * Spot FX - What is regulation? "Sorry Sir, your order was filled during a period when we did not have dealable quotes, therefore your order was not really filled (even though we said it was), and neither is your paper profit." --------------------------------------------------------- Spot fx dealing desk, cont'd: "Sorry, sir, the charted price is a misquote, your limit order is not filled. The price was 'never there'. But try again, we may have some more customers to stop out at that price later." ___________________________________________________ Then, assuming your fade is filled at the spiked quote, you still have to exit when "the spot is back in line." Put your limit at that number and see if it is filled and how promptly. Remember, your arb isn't locked down unless and until both ends of the spot half are filled correctly.
Hi, Are you suggesting its near-impossible to profitably trade a tight-stop strategy (10-15 pips) with big size, using a retail fx 'bucketshop'? What about trading with an ECN based platform? I thought Oanda was above the board when it came to price manipulation and stop running? Thanks
Your thinking is correct: their users' consensus is that Oanda is, in fact, above board, when it comes to (the absence of) price manipulation and stop running. Anyone can explore their (uncensored) message board and see for oneself. However, if you must employ a tight-stop strategy (a bad, bad idea for most) and your target profit is comparable to your stop loss, you'd have slightly more of a shot implementing such a strategy in futures, not spot. The spread itself becomes a significant negative edge you must overcome.
Thanks for the quick and informative reply. Oanda does seem to earn bonus points - especially on this board - for transparency, spreads and overall 'integrity'. Regarding tight stops. Futures has always troubled me in this respect because of the characteristic massive gapping that could blow through a stop. Hair raising!
When your stop level is triggered in the futures market your order becomes a market order and it is executed at the next available price. So yes I agree at times when the market is "gappy" it can make for very stressful trading. Many fx Spot brokers will guarantee your stops. This, at first glance, appears the work in your favour because you never have to worry about huge spikes that occasionally happen. However its precisely your stops that give your game away on the other fifty trades you make. Ask your self; how much does that cost you in the long run? Remember, this is not a real market and you are playing against your broker or MM or whatever you want to call them. (Weasels may be an appropriate term.) As such you want to keep your cards very close to your chest. The key here is the amount of leverage you use. These fx shops offer 200:1. Trading even half that is simply suicide. I trade mini's and for each $1000- $1500 in my account , depending on market conditions I'll trade 1 lot. Thats it. I use a mental stop placed well beyond the point where the trade ceases to be valid and a "disaster" stop 100 to 125 pips beyond that. The reason for that is because when spikes do occur, I never have to worry about getting wiped out. Ninety five percent of the time the prices come back to previous l levels and I can get out with a small loss for break even. From time to time I'll get whacked at my stop, but this is so rare that its worth it and I consider it an insurance premium, a cost of doing business. In short, someone coming into this game with less that $1000, trading more than one lot, doesn't have a prayer. They simply cannot survive long enough to learn anything of real value. Much less tactics to counter the dodgy practices of your typical FX retail market maker.
Lets put it this way. If you dont care about your counter-parties legal terms for trading, never check their credit or their balance sheet, are OK with any trading practices they employ and dont know what your recourse is if they blow up, why dont you send ME your money and trade with me. I'm happy to qoute you a market, hold your orders and stops and I'll even email you your fills.
I posted this on another thread but it might be more appropriate for this one, so mea culpa for the redunancy but I'm wondering if any/all could comment on the following excerpt from the IB website: "IB is the first broker to provide direct-access forex trading with interbank quality spreads, institutional size and no conflict of interest. Unlike other FX dealers that trade against the customer, IB evaluates multiple major bank dealers and routes its customers' orders straight to the dealer with the best price. " Bullshit? Or not?