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How to know if a Forex dealer is taking the other side of your trade?
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How to know if a Forex dealer is taking the other side of your trade?

  #11 (permalink)
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Big Mike View Post
Thanks guys.

I raised the question simply because there has been a lot of talk about "I don't want to use a broker who trades against me". People cite that as probably the primary reason for not trading Forex.

Where personally, when I started trading Forex through MB Trading, I noticed zero effects or issues with them "trading against me". I opened the MBT Forex account so I could 1) learn more, and 2) use it for larger term swing trades on the Euro, while I maintained my primary Velocity account for my intraday trading.

I've used limit orders every time, usually placing a limit order @ the current offer and getting filled immediately. There has been no slippage, and there has been no bad spreads. In fact, the spread is almost always less than 1 pip.

Compare this to the futures market, I would have to trade the Micro EUR/USD (M6E) to offer a similar $1/pip risk. I still have no capability of buying into or scaling out of at less than $1.25/tick on M6E, whereas on Forex I could go as low as $0.10/pip. But that is fine, $1/pip is cheap enough.

So then compare the commissions, fills and spread. Futures commissions are much higher. Forex has clear advantage here, as the CME Euro is a secondary market with far less liquidity. On M6E in particular, the spread is enormously huge, often times 5 or 6 ticks.

The only thing left I can think of are: 1) Bad press by some Forex Dealers, like FXCM's recent bad press and $2MM fine from the NFA. This was a result of asymmetrical slippage. 2) Desire to trade a market other than currencies. Obviously if you want to trade an Index or Commodity, Futures are the way to do it.

But as the admin of the site, when new traders ask my advice, I'd like to see them position themselves for the most likely change of success. And I think that for some traders, especially less experienced ones, that means they should open a Forex account first, before a Futures account, so they can minimize risk during the learning process. If the CME Micro's were more liquid this wouldn't be necessary, but unfortunately that is not the case. The CME should really consider lowering margins and fees further on the Micro's to try to create more liquidity.

Mike

With the $1/Pip account, how much to you pay in fees round trip per trade?

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  #12 (permalink)
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I have not traded during news if that is what you mean. But I've not once seen a spread larger than 1 pip on the "Level 2" type screen in MBT Desktop Pro.

As for error messages and such, yes that is for another thread, Desktop Pro 2.0 has been very flaky and lots of annoying pop up messages.

MBTrading pays you to use limit orders. If I were using Oanda or FXCM then I am not sure what I would do in this case.

Mike

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  #13 (permalink)
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monpere View Post
With the $1/Pip account, how much to you pay in fees round trip per trade?

Let me go place a trade so I can remember I haven't placed a new swing trade in several days as I've been too busy.

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MB Trading - Commissions

$0.42 per side, so $0.84 per trade. But this does not count the rebate they give you when doing limit orders, which is a discount of $2.95 per 100,000 lot. So after ten 10,000 lot trades I get a $2.95 rebate, or roughly $0.295 per trade rebate.

Mike

Due to time constraints, please do not PM me if your question can be resolved or answered on the forum.

Need help?
1) Stop changing things. No new indicators, charts, or methods. Be consistent with what is in front of you first.
2) Start a journal and post to it daily with the trades you made to show your strengths and weaknesses.
3) Set goals for yourself to reach daily. Make them about how you trade, not how much money you make.
4) Accept responsibility for your actions. Stop looking elsewhere to explain away poor performance.
5) Where to start as a trader? Watch this webinar and read this thread for hundreds of questions and answers.
6)
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  #14 (permalink)
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monpere View Post
With the $1/Pip account, how much to you pay in fees round trip per trade?

At MBT, $1 a pip would cost you 40 cents in commission each way on Eur/Usd. Of course you also have to pay the spread which is usually from .5 - .9 pips. That's if you do not use limit orders.

Use of a limit order would give you a credit. I don't remember the exact amount of each credit but I think it comes out to just a bit more than the amount you pay in commission each way. So if you enter + exit with a limit then you actually make money.

Other brokers, such as Oanda, do not pay for limits but they don't charge a commission either. Oanda is the only non-ecn broker I trust.

Edit - See that Mike just gave info above.

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  #15 (permalink)
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Big Mike View Post
Let me go place a trade so I can remember I haven't placed a new swing trade in several days as I've been too busy.

MB Trading - Commissions

$0.42 per side, so $0.84 per trade. But this does not count the rebate they give you when doing limit orders, which is a discount of $2.95 per 100,000 lot. So after ten 10,000 lot trades I get a $2.95 rebate, or roughly $0.295 per trade rebate.

Mike

I wish I knew about it when I was starting out. I went with ETF's, and the commission were $2 per trade.

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  #16 (permalink)
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I had several broker at the same time, but using the same robot (on Metatrader) on all my Forex accounts on my server... and there was big differences on filled (or not) orders, slippage and problems closing positions. Now I have only 2 brokers, Alpari UK, which seems to be the best of the worse, and IB of course.

I believe only in profits, not in prophets.
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  #17 (permalink)
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There are only a few forex brokers that seem to have a decent reputation:

Oanda - use them myself, mostly for exchanging currencies for business and long term positions. No problems. Good customer service.

MBtrading

The Collective - supposedly run by traders. You pay a flat monthly fee

Dukascopy - Swiss. Good reputation except they don't allow very short term trading.

Most of the others, especially the popular ones you see advertised everywhere, all have dozens or hundreds of horror stories out there about blatant ripoffs and abuse. Maybe some of these stories are false, but I doubt they all are. You don't hear similar horror stories about futures, equities, and options brokers by and large; you mainly hear them about forex bucket shops.

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  #18 (permalink)
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I guess it depends what you mean by "trading against you".

You probably think that when you place a trade, your broker puts that out onto the market and you get a fill when the order is matched against an opposing trader.

What really happens in forex when you place a trade is - nothing, nada, zip. The broker takes your trade and does nothing. by doing nothing they take on the risk. Hence "trading against you".

They know that most people will lose and therefore they aren't taking on an awful lot of risk.

If they take your trade to the market, they would just capture the spread on your entry & exit.

If they do nothing with your trade, they collect all of your losses. As most people lose, this is a lot more lucrative than capturing the spread.

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  #19 (permalink)
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Brokers have to take the other side of your trade

Unless you are a trader with a large account trading with a true ECN and have completed the credit qualifications, the broker must take the other side of your trade. It is that simple. Without that simple requirement the counter party integrity would not be sufficient in the FX market.

Forex brokers do vary in how they handle the risk. I have no issues with Oanda in this regard.

As a trader, it is your responsibility to evaluate your fills. You should know if you are getting excessive or asymmetric slippage and should take the appropriate action. As for the whiners complaining about broker stop hunting, any responsible trader should understand that the "market" is definitely stop hunting and that the market knows where the common places that have the most stops. There is only one person to blame if you are getting ripped off.

Bad fills are why I left the regulated exchanges back in the 90's. Felt like I was getting mugged with each order. I probably should have tried another broker, but I was done with the idiotic process of being required to call my broker every morning to place/modify my orders. Electronic trading should have fixed those issues. But until the regulated exchanges offer true 24 hour electronic trading with good liquidity or Oanda becomes a problem, I will happily stay with FX.

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DionysusToast View Post
I guess it depends what you mean by "trading against you".

You probably think that when you place a trade, your broker puts that out onto the market and you get a fill when the order is matched against an opposing trader.

What really happens in forex when you place a trade is - nothing, nada, zip. The broker takes your trade and does nothing. by doing nothing they take on the risk. Hence "trading against you".

They know that most people will lose and therefore they aren't taking on an awful lot of risk.

If they take your trade to the market, they would just capture the spread on your entry & exit.

If they do nothing with your trade, they collect all of your losses. As most people lose, this is a lot more lucrative than capturing the spread.

Thank you for giving me something to consider.

Oanda has claimed that over 75% of their orders are matched with other customer orders. If you do some digging around you will find that one of the founders has/had a public fund that also provides Oanda with liquidity. Now this is the part that is interesting:

Currently Oanda's spreads are still higher than normal even though the competition has resumed normal spreads. This occurs from time to time. Using DionysusToast's concept seems to apply here. Signs point to Oanda getting caught with some adverse risk exposure during the recent volatile times and now they are recovering it.

This does not bother me since Oanda has proven to be one of the most efficient FX brokers. By assuming some of the price risk they save hedging costs. As a trader, I want good fills at a competitive cost with a well capitalized broker.

P.S. Oanda is FAR from being a perfect broker. This is not the place for a broker technology rant.

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