Spot FX vs M6E futures | Currency Futures


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Spot FX vs M6E futures

  #4 (permalink)

seoul, Korea
 
Trading Experience: Intermediate
Platform: Multicharts
Broker/Data: CQG, DTN IQfeed
Favorite Futures: YM 6E
 
treydog999's Avatar
 
Posts: 895 since Jul 2012
Thanks: 291 given, 1,017 received


bnichols View Post
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.

I so for a minimum order of 30,000 (after leverage) I am taking a $5 round trip, my tick value is about $3. so i am paying 1.667 ticks, which actually isn't bad. Slightly less than what I am paying for the M6Es, but my tick value is much lower at $1.25. Thanks for your advice, but I am looking for something with a smaller tick value, the smaller the better with comparative commissions. I appreciate your input though.

Regarding your algorithm stopping functions, I have never heard of those ones before. Usually I just compare vs past maxDD and my Monte Carlo for max DD, average draw down, and average winning and losing streaks. If we break any of those barriers, its time to turn off. But usually that takes quiet a while of drawdown. Though 10 trades with a mean of negative profit seems a bit pre emptive as you mentioned 50% winrate will garner 16 losing trades in a row. If that's true are you not pulling the plug early and not allowing the system to recover possibly, since it is within statistical bounds. I have never gotten a system that was not over fit with a >65% win rate so that's my assumption.

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