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FX Spread Shocking To Me
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FX Spread Shocking To Me

  #1 (permalink)
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FX Spread Shocking To Me

I'm a visual trader, all technical chart reading. Been trading futures for a few years. There's some setups that have large stops so I've been passing on them to limit my risk, however, many of them are the better reward trades.

After playing with some FX demo accounts, I saw that there is a very low risk in the smaller divisions of the lots available. So I thought this might be the answer to live trading these higher risk/reward setups.

I only tried 2 brokers' demo accounts and then opened a mini account. It took only 2 hours and I was actually ready to trade.

I didn't trade, because the spread was impossible. The ask was at resistance and the bid was at support. Spreads were so wide, that there was no way I could see any profitability since my targets were sometimes still within the spread. It would require extremely large moves to be at all profitable, so I just sat there and watched it. Meanwhile, back on my futures machine, I was watching related contracts to the same markets and there was just a one tick spread, and commissions, of course, but it pretty much had me wondering if this is viable at all.

The spreads were about the size of a 5m bar! So scalping seems out of the plan. If I don't see this improving I'll have to cancel this account and get my funds returned.

So this brings up a ton of questions like, wrong broker? wrong time of day? does fx only work on 15m or 1h bars in strong trends? are there tighter spreads on other contracts? ( I looked at the ones I understood from futures trading ) Is all FX a scam? etc.

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  #3 (permalink)
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Check spreads here:
Spreads | Myfxbook

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  #4 (permalink)
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jaytrades View Post
I
So this brings up a ton of questions like, wrong broker? wrong time of day? does fx only work on 15m or 1h bars in strong trends? are there tighter spreads on other contracts? ( I looked at the ones I understood from futures trading ) Is all FX a scam? etc.

The best (most narrow) spreads usually exist in the financial market hours of the underlying currency.

It works on anytime frame but obviously the less you have to cross the spread the better, dealer spreads are essentially just a replacement on a commission, If you trade through TOS or one of the major banks you can elect to have commission instead of a spread.

Yes there are tighter spreads on other contracts, again it is based on the liquidity of the underlying currency, so the spread in eur/usd is less than the spread in aud/jpy.

No its not all a scam, but all brokers are not created equal. But that fact that you can fund a FX micro account with a credit card should be a little off putting.

I personally like to play around with the eur/usd for swing trades in the 6E, as I'm learning to swing trade.


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  #5 (permalink)
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Big Mike View Post
Check spreads here:
Spreads | Myfxbook

Mike

That's an impressive list of spreads for brokers, seems to be changing real-time. Even on a Friday night when the markets should be closed. My broker isn't tightest on list but is near the smallest spread. I'll seriously need to have a strict strategy for this. Thanks for link.

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  #6 (permalink)
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jaytrades View Post
So scalping seems out of the plan.

Scalping is the worst thing you can do, especially on forex (because of spreads) - but really on any market. You have a high cost of entry, commission, slippage, and the way to minimize the impact of that is to increase the time frame.

If you don't like the idea of forex or the spreads, you can also look at equities. Futures should be last on the list and only used by people that are already consistently profitable with either equities or forex.

Please check out:
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Mike

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  #7 (permalink)
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addchild View Post
The best (most narrow) spreads usually exist in the financial market hours of the underlying currency.

I'll look for that and also compare to pit times also for futures of similar pairs. I think CME pit for currency futures is 8:20 ET to 3, not sure how much that impacts the FX market, however.

I use this handy site for world markets times, worldmarkethours.com

liquidity - good point there, I'll look for that also.

scam - looks so fishy with so many flashy adds and companies, but I thought I did an ok choice with IBFX, they are a subsidiary of TradeStation, which also seems a little encouraging, even with the credit card funding

Yes, I'll definitely be looking for a 'swing' rather than scalp. Swing for me just means more than one pivot, others call 'swing,' longer than one day hold.

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  #8 (permalink)
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Big Mike View Post
Scalping is the worst thing you can do, especially on forex

True, I noticed that right away with that spread.

Scalping for me means trading just to the nearest target, usually a pivot. I've been doing ok with that in futures. The spread scalping is what I rarely do, except in the long bond $31 per tick ZB.

My slippage has been extremely rare since I left TradeStation, it was daily there, now only 2 or 3 times a year, and never more than one tick.

Should be a busy week coming up, more to watch now.

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  #9 (permalink)
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jaytrades View Post
I'm a visual trader, all technical chart reading. Been trading futures for a few years. There's some setups that have large stops so I've been passing on them to limit my risk, however, many of them are the better reward trades.

After playing with some FX demo accounts, I saw that there is a very low risk in the smaller divisions of the lots available. So I thought this might be the answer to live trading these higher risk/reward setups.

I only tried 2 brokers' demo accounts and then opened a mini account. It took only 2 hours and I was actually ready to trade.

I didn't trade, because the spread was impossible. The ask was at resistance and the bid was at support. Spreads were so wide, that there was no way I could see any profitability since my targets were sometimes still within the spread. It would require extremely large moves to be at all profitable, so I just sat there and watched it. Meanwhile, back on my futures machine, I was watching related contracts to the same markets and there was just a one tick spread, and commissions, of course, but it pretty much had me wondering if this is viable at all.

The spreads were about the size of a 5m bar! So scalping seems out of the plan. If I don't see this improving I'll have to cancel this account and get my funds returned.

So this brings up a ton of questions like, wrong broker? wrong time of day? does fx only work on 15m or 1h bars in strong trends? are there tighter spreads on other contracts? ( I looked at the ones I understood from futures trading ) Is all FX a scam? etc.



The good news is - FX is not a scam. The bad news is - You however are definitely getting scammed by your "broker".

A few things to consider - any of the major FX pairs (Euro, Aussie, Cable, Swiss, Yen) should have tiny spreads. There is so much competition now between the OTC spot markets and liquidity pools that most retail traders can get in on the action without paying through the nose for the privilege. Some brokers will further reduce your spreads depending on your monthly trade volume.

Unless you want to trade the South African Kronor against the Brazilian Real, I think you should be fine in terms of the cost of the spread versus the size of a move on say the 5m chart. If you are trading tick charts scalping 6-7 pips here or there then of course a round trip spread of 1.4 pips (0.7 x 2) will hurt you.

Use FX Intelligence Analyzer: Compare live spreads and quotes from multiple brokers to compare

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  #10 (permalink)
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Traderji View Post
The good news is - FX is not a scam.

Not a scam, true, and spread was ok I guess, just now on AUS/USD. Execution was smooth. Compared the action on fx broker's data to my futures broker's data and they were near enough.

Sunday night so spread seemed a bit improved and there was some momentum. Was able to gain on the first pivot and decided to hold for another and it worked out well. (I just didn't adjust size from demo account so I had only 10pct of what I was trading there, easy to stay calm with risk that low, I only made 18cents )

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