Why MB trading is not cheaper than Oanda for scalpers that trade at market.

Discussion in 'Forex' started by cvds16, Apr 28, 2011.

  1. cvds16

    cvds16

    After all this talk on ET about lower spreads on ET about MB trading and their wonderfull model compared to Oanda I opened up a demo account there and tried to do the comparison ...
    a typical example (I know there no such thing in forex, but bear with me and I think you will get the idea ...) for scalpers would be that they would be buying and selling over 95% of their orders at market (I know this is debatable but it's true at least for all those people I am in chat with, in fact the number would be closer to 99%)
    nowadays oanda has a spread most of the time of 0.9 to 1.2 DURING MOST CIRCUMSTANCES (they used to be slightly better but let's face it this hasn't improved with last years volatility). for my examples I'll take the 1.2 which is on the bad side
    so their market is 1.48335 at 1.48347 as I write.
    MB trading has smaller spreads most of the time ranging from 0.4 (really exceptional) to 0.9 (most of the time), for my example I'll take an average of 0.7 which is generous.
    so their market would be 1.48338 at 1.48345.
    now I'd want to buy 100K at both sides and sell that a fraction of a nanosecond later without the markets having moved.
    with oanda I would have bought at 1.48347 and sold at 1.48335 and would have lost 12 USD through the spread.
    with MB trading I would have bought at 1.48345 and sold at 1.48338, this would have only cost me 7 USD through the spread. HOWEVER you have to add commission costs: 2.95 USD when you buy + 2.95 USD when you sell. you add this up and you would have lost 12.90 USD.
    So I have been generous here in the above example for MB trading and think reality is for market orders is worse with an average spread of 0.8 while Oanda has a better spread most of the time of around 1.0.
    The picture does get different however if a lot of your orders are limit orders ... but I think untill at least 25% are limit orders Oanda is the cheaper option.

    On a additional note (I could be wrong here as I am still exploring MB's platform): with Oanda it's possible to put a market order in with a fixed pip stop attached to it (no matter where you got executed your stop will be at 6 pips for example of your entry price: if you sell at market at 1.4840, your stop will automatically reside at 1.4846 with one click) this is essential to my trading: fast scalping with tight stops. So far (?) I haven't found a way to replicate this with MB.

    If MB would manage to lower their commissions to the 2USD range for 100K and it would turn out they do have this second feature then and only then would I be interested in switching to them.
    I do have to admit that chartwise MB beats Oanda hands down. But we are not in this game for the good looks but for the money :D
     
  2. Pippi436

    Pippi436

    Still, for very short-term trading commission + smaller spread is preferable to wider spread w/o commission - even if transaction-costs would be the same on paper. If you have stops/targets of just a few pips, its likely that sooner or later your stop get hit just by these 0.5 pips in spread that you dont have with commission based pricing. This effect plays a lesser role the more longterm you trade, but with extremely small stops/targets its there.
     
  3. cvds16

    cvds16

    reread what I wrote exactly, it's obvious you didn't get it: no the spread of Oanda is cheaper than MB when push comes to shove; especially for short term traders ...
     
  4. Pippi436

    Pippi436

    And how cheap is it when a stop gets hit by those 0.3 pips Oanda quotes wider that wouldnt have been hit on MB?
     
  5. cvds16

    cvds16

    Lets make an example, once again being generous for MB as I know them only from demotrading.
    Let's make a market: Oanda trades bid-ask: 1.48291-1.48303 (that's 1.2 spread) while MB is trading at the same time 1.48293-1.48300 (that's 0.7 spread) being generous for MB again and bad for oanda. You buy at 1.48303 with oanda, but hey MB is cheaper at 1.48300, you have a stop for both trades at 1.4825. So what did you lose with oanda: you lost 54 USD (I added 1 pipette for slippage), now lets see what you lost with MB: you only lost 50 USD (taking no pippettes for slippage as I have no experience there but doubt it will be that good), but hey, you lost an additional 2.95 two times, so here you lost 55.80 USD. Now which is the greater number 54 or 55.80 ?
     
  6. You're just realizing this now?

    Oanda's spreads will beat the retail ECN's on after-commission basis IF you have little to no slippage, and IF you never trade with limit orders (thus receiving MBT's add liquidity rebate).

    That being said, I have yet to meet a long-term profitable FX scalper regardless of broker..
     
  7. cvds16

    cvds16

    no, I am not just realising this now, in fact I have been saying this for a long time, I opened this thread to really open up the eyes of some guys saying on ET MB/ECN's are way cheaper than Oanda ...
     
  8. TfaL

    TfaL

    What about safety of funds?

    MB Trading
    Source: http://www.mbtrading.com/safetyandsecurity.aspx

    Oanda
    Souce: http://fxtrade.oanda.com/legal/risk-warning

    With such small differences in commission, I'd rather opt for (some) more protection.

    Regards,
     
  9. lol, IF IF IF... how many more conditions have to be met to make your statement true. Matter of the fact is part of the cost of trading IS slippage, IS bad prices, IS delayed execution, IS a crashing platform, IS that you want to place limits/stop without your broker abusing you. Factoring all that in... all the bucket shops, including Oanda, look a lot worse than ECNs. Stop kidding yourself and others.



     
  10. That was my point basically. The pros of a few extra-subpips on spread/cost don't outweigh the cons of the MM model and Oanda's other issues.
     
    #10     Apr 28, 2011