Spot FX vs M6E futures | Currency Futures


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Spot FX vs M6E futures

  #3 (permalink)

Dartmouth NS
 
Trading Experience: Intermediate
Platform: MC, MC.Net, NT, TWS
Broker/Data: IB / IQFeed / Kids
Favorite Futures: Forex, stocks
 
bnichols's Avatar
 
Posts: 638 since Feb 2010
Thanks: 64 given, 460 received


I'm satisfied with Interactive Brokers for spot FX (commission USD $0.00002 per unit, minimum $2.50 per order or $5.00 round trip, where 100,000 units=standard lot), approximately Interbank spreads. IB considers only the dollar amount of the order rather than lots, so you can trade any number of units per order as long as the dollar amount of the order exceeds some minimum after leverage (IIRC something like $30,000 minimum). Smaller amounts are treated as currency exchange transactions rather than trades and subject to higher fees. Leverage is relatively small compared to other FX brokers (vicinity of 30x vs 100-400x). Minimum account size is $10,000, so a $10-20,000 account will qualify. As one might expect costs become important if executing a large number of trades per day, scalping for a few pips at a time, say.

I don't know the exact numbers but would guess a lot of traders trade spot FX algorithmically using simple bots (a few indicators, up to 5 parameters, say). These work well enough until they don't Typical rules of thumb are to take a bot offline when the mean of the last 10 trades becomes negative or the ratio of the mean expectancy to the standard deviation falls below 0.25. Like any mechanical system bots will encounter significant drawdowns when in a losing streak, the probability of occurrence and severity of which can be estimated by simple formulas. For example, a win rate of 50% implies that at some point the strategy will suffer 16 losing trades in a row; win rate of 30% implies a streak of 30 losing trades will occur at some point. In general drawdown is inversely proportional to win rate (and proportional to risk), so in theory it's possible to tailor an algorithm to one's risk tolerance. Lower risk tolerance tends to incur higher transaction costs due to smaller time frames and higher trading frequency, however.

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