I trade Forex and going for a small amount of pips (1-25) using leverage is my preferred method.
I use an ECN which of course charges a commission. So each trade I have to pay the spread + commission, which eats a bunch of profit.
I've heard some people mention that trading futures or stocks is the way to go if you want to scalp because the costs are less than trading FX. Is that true and if so, how big is the difference? Is there a website that breaks it all down and shows comparisons?
I disagree. There is an easy answer. FOREX is VERY EXPENSIVE compared to futures or Stocks.
Not even close. I have traded forex for 1.5 years and I decided to return to just futures because I wanted to scalp. People who scalp in FOREX are typically people who don't know how to get into trading the other markets etc..
I mention FUTURES to a bunch of Forex traders and they don't like the lack of liquidity, but dream about the costs of commission. However, FOREX is nice because you can play with Pennies.
Even an ECN on forex is almost a joke. Watch how much your B/A move when you place an order. Compare that to a market maker and you will find that your entries are considerably worse. I have traded about 3 ECN's and about 5 different market maker brokers with 10's of K's and in my opinion it is a challenging market to scalp comparatively, but a lower barrier to entry for most traders.
U sure both spread and commission ? I use MB trading for forex and pay $2.95 total per $100,000 each way. I traded 2 lots of eurusd( $20,000 ) today and the commission was 76 cents to get in . One contract of 6E would carry a commission of around $5 and each tick is $12.50 . Im not scalping forex though and dont place more than 1 or 2 trades a day or even a week .
The following user says Thank You to Eric j for this post:
I agree you are up against it scalping forex on low timeframes unless you stick with the euro which has a tight spread. My broker doesnt charge commission and the euro spreads are about 1 pip during Frankfurt/US session....But it is a very valid option for position or swing trades on many pairs.
The following user says Thank You to Linds for this post:
You can definitely scalp the EUR/USD with total cost (spread+commission) of under 1 pip in spot fx at high execution speeds. I'm not speaking of the typical Metatrader ECN brokers though and account deposits are higher (25k-50k minimum).
Oanda often shows spreads of 0.9 pips in the EUR - no additional costs, execution lightning fast, no accout minimum !
Interactivebrokers often has a spread of 0.5 pips, commissions of an additional 0.4 pips for round turn going down to 0.2 pips the more volume you do, again very fast execution.
So it's a pretty close race imo.
The following user says Thank You to TheSeeker for this post:
I agree with @Blumele, scalping on Futeres is much better than on spot fx, the speed of execution is incomparable.
@Linds, what u don't pay in commission you will pay more on execution speed, and slippage.
The advantage of retail spot fx is the possibility of split the standard contract size, so is good for low capital account, and for swing traders, like does @Eric j that trades 'mini lots'(ie 1/10th), but the commission are little lower on standartd contract that in FX futures usually is bigger, like on 6E is $125.000 and u will pay about $4.50 rt, this is not for 6B(GBPUSD) where the contract size is half 6E but you will pay the same commission, so spot fx can be considered for trade many pair that you will not find on FX futures. At the and all depend on trading style and capitalization.
Take your Pips, go out and Live.
The following user says Thank You to LukeGeniol for this post:
Yes, agree, you are limited to the primary pairs. EURUSD, USDJPY, and maybe AUDUSD or similar, but they are definitely USD based.
Oanda you have to use their software and I haven't seen it work like a DOM and I also haven't seen the ability to 'script', so from my understanding it is all Manual unless you do the passthrough feed through "SPYDER"?? (I can't recall) or buy their interface access for like 600.00 per month to do so.
Oanda hedges every trade I believe. IB will move on you and you think if you are only looking at their chart that that is what the real price is. Overlay different price feeds and execute different orders at the same time and you will find that ECN is a joke in a way. It shows how illiquid Forex really is.
If you go market on most futures, you will definitely get filled unless it is an unimaginable amount for which a retail trader would be involved. My point is that with ECN you will be market orders really, so for scalping and you need to get your small entry area, then Futures is better for being more precise.
But, I am not experienced besides NinjaTrader, Tradestation and MT4, so there are probably other interfaces that I am not familiar w/ that may be better.
I weighed it heavily when I decided to get away from MT4/Forex.