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  • #201
  • Feb 26, 2015 8:32am Feb 26, 2015 8:32am
Quoting MaximeCau
.................. As most of retails are loosers, it's a big business to take the other side of the trade . Lot of money to make....
I'll adventure and say that any retail Broker that doesn't take the other side of their clients who consistently lose money, they don't have proper risk management put in place
  • #202
  • Feb 26, 2015 12:00pm Feb 26, 2015 12:00pm
I use Oanda as Im still trading mini lots. I like to scalp the one hour chart but have noticed that during news times the spreads can go up to 15 pips or more.

I know Oanda is not an ECN broker. Do ECN brokers also have these high spreads during news time?

Would greatly appreciate some feedback on this. Thanks
  • #203
  • Feb 26, 2015 12:12pm Feb 26, 2015 12:12pm
Usually in ECN you risk slippage and wider spreads (depends on the kind of news) during news. I personnally never trade during news. I take an order before, never during the news...
  • #204
  • Feb 26, 2015 12:15pm Feb 26, 2015 12:15pm
thanks Max, as I wasn't sure if ECN brokers have same increased spreads during major news time
  • #205
  • Feb 26, 2015 12:17pm Feb 26, 2015 12:17pm
Quoting MaximeCau
Usually in ECN you risk slippage and wider spreads (depends on the kind of news) during news. I personnally never trade during news. I take an order before, never during the news...

I usually take the trade before news comes out, but when I place my stop, it seems as the increased spread that occurs during the news could easily take out my stop
  • #206
  • Feb 26, 2015 12:18pm Feb 26, 2015 12:18pm
is the best way to combat this by using a mental stop versus an actual placed stop
  • #207
  • Feb 26, 2015 12:23pm Feb 26, 2015 12:23pm
Quoting alex1976
is the best way to combat this by using a mental stop versus an actual placed stop

Don't use too tight stops : use support and resistance to be sure you have to go out. A good analysis can give you an accurate vision of what can happen during the news.

Personnally I wait the closure of the candle to know if I'm right or not. I never had very good surprise during the release of the news.
  • #208
  • Feb 26, 2015 4:36pm Feb 26, 2015 4:36pm
Quoting MaximeCau
Usually in ECN you risk slippage and wider spreads (depends on the kind of news) during news. I personnally never trade during news. I take an order before, never during the news...
NOT true. IB has pretty much the same spread during news time and this is during NFP's and it's an true ECN, at least truer than some of them.
Make your losses in demo. Earn your profits live.
  • #209
  • Feb 26, 2015 4:38pm Feb 26, 2015 4:38pm
Quoting MaximeCau
Yes the main reason of the troubles is many retails can't invest enough money and take standard lot size. Thats why many forex brokers are dealers and offer fake forex trading. Another reason is commissions are based on volume... Retails don't make millions and millions volumes, so brokers' income won't be high and they will charge high commissions. But lot of retails won't be happy with such commissions... and even with trading conditions : slippage, no guaranteed stop loss... As most of retails are loosers, it's a big business to take the other...
But they hedge against our positions? So any profit that they have made taking the other side of our trade would've been offset by the losses that they would've made in their hedging trades, no?
Make your losses in demo. Earn your profits live.
  • #210
  • Feb 26, 2015 6:02pm Feb 26, 2015 6:02pm
It seems many are getting confused with a STP broker rather than dealing directly over an ECN.
  • #211
  • Feb 26, 2015 8:29pm Feb 26, 2015 8:29pm
Quoting Forexia
{quote} But they hedge against our positions? So any profit that they have made taking the other side of our trade would've been offset by the losses that they would've made in their hedging trades, no?
90% of retail traders loose 90% of their deposit within 90 days
  • #212
  • Feb 26, 2015 10:17pm Feb 26, 2015 10:17pm
Quoting MaximeCau
{quote} 90% of retail traders loose 90% of their deposit within 90 days
Ok so that just proved my point. It's a wash for the market maker who hedges then.

1. Trader loses --> Broker won (minus)

2. Broker hedged --> Broker lost

Result: 0

If 90% of the retail traders lose then the market maker is getting their profit offset by the losses 90% of the time. Besides the spread that they might earn, they shouldn't be making that much money. And we saw that in FXCM and Alpari UK's case in the SNB crisis, they hedged against retail traders' massive losing CHF trades and they lost big. And for the real market makers who don't hedge, I wouldn't trade with them even if my life depends on it because their conflict of interest so if I were a broker I would stand to earn a lot more if I just operated in a pure ECN agency model where I just match the buyer with the seller with order aggregations and earn a commission with each trade that I match. For all the trades, whether they are winning or losing trades, I pass them onto the LP's to deal with. No risk exposure for me and it's guaranteed money as long as the traders trade. And if they don't trade, I do like what Interactive Brokers does, charge them account inactivity fee.

And in SNB crisis situation, they shouldn't have suffered much if at all if they had been operating in pure ECN order-matching model. And if they publicly confirm that our counterparties would be those LP's and not them. For those traders who had negative balances, they would be dealing with those LP's directly (who caused them in the first place. See the article link below) and the ECN brokers would be just walking away with commissions earned.

Maybe this is why we didn't hear much complaint from Baxter FX or LCG or Prime Markets, those supposedly more purer ECN brokers during the SNB aftermath.
Make your losses in demo. Earn your profits live.
  • #213
  • Feb 26, 2015 10:42pm Feb 26, 2015 10:42pm
Other explanations : look at customers : Baxter FX, LCG FX or FIXI are institutionnal/professionnal brokers. Their deposits are higher and traders professionnals.

It's very different with FXCM and other retails brokers. Above all FXCM through dailyfx said to customers to be long on EUR/CHF : 98% customers were long...

Institutions and professionnals traders have more money than retails and so have less problems to pay their losses. I know a guy at FXCM who lost 800k. How do you think he can pay ?
  • #214
  • Feb 27, 2015 12:26am Feb 27, 2015 12:26am
Quoting Forexia
{quote} And in SNB crisis situation, they shouldn't have suffered much if at all if they had been operating in pure ECN order-matching model.
That would be true only if the positions were under the clients' names, but that's not the case...

A broker passes trades on to the market under its own name not their clients (ECN or not) as he is the only one vetted by other players as a reliable counterparty with established credit lines.

Clients' accounts with unreasonable leverage (ie > 20:1) would likely have been wiped out by the SNB move. The broker is still responsible for the CHF losing positions as they are under its own name but now it can't pass those losses back to its clients.

A pure MM broker (not hedging any positions) would have had a great time running through the SNB move as it would have just siphoned its clients' losses. A pure ECN broker would have had a terrible time as he has no alternative but to bear the loss of its clients' bankrupt accounts...
  • #215
  • Feb 27, 2015 2:15am Feb 27, 2015 2:15am
Quoting MaximeCau
Other explanations : look at customers : Baxter FX, LCG FX or FIXI are institutionnal/professionnal brokers. Their deposits are higher and traders professionnals. It's very different with FXCM and other retails brokers. Above all FXCM through dailyfx said to customers to be long on EUR/CHF : 98% customers were long... Institutions and professionnals traders have more money than retails and so have less problems to pay their losses. I know a guy at FXCM who lost 800k. How do you think he can pay ?
Yeah but from the broker's point of view, that's not his problem. That's LP's problem if the broker had operated in a pure order-matching agent model. If the broker had specifically stated the counterparty of the trade is the LP to the retail trader and vice versa then if anything happens the LP would go after the trader and etc. But then again, there is the issue of anonymity, we are not supposed to know the identity of the counterparty of our transaction, nor of us. That's the beauty of the OTC market; it's the appeal of the hush hushness. LOL
Make your losses in demo. Earn your profits live.
  • #216
  • Feb 27, 2015 2:52am Feb 27, 2015 2:52am
Quoting actalis
{quote}A pure MM broker (not hedging any positions) would have had a great time running through the SNB move as it would have just siphoned its clients' losses.
What ? It is an obligation for them to partial hedge clients exposure on markets. That’s one of the regulations' rules.
  • #217
  • Feb 27, 2015 2:58am Feb 27, 2015 2:58am
Quoting MaximeCau
{quote} What ? It is an obligation for them to partial hedge clients exposure on markets. Thats one of the regulations' rules.

What do you think they just hedge the risk of the entire book, because if they try to hedge each individual trade and be in an out of the market is an extra cost for them as they are giving away the spread, pay extra commissions, so in this regard they only hedge to bring the risk limit in line with the permitted risk levels set by the company and regulatory body. What's the standard practice?
  • #218
  • Feb 27, 2015 3:02am Feb 27, 2015 3:02am
Quoting triger88990
{quote} What do you think they just hedge the risk of the entire book, because if they try to hedge each individual trade and be in an out of the market is an extra cost for them as they are giving away the spread, pay extra commissions, so in this regard they only hedge to bring the risk limit in line with the permitted risk levels set by the company and regulatory body. What's the standard practice?
The standard practice seems to be that they hedge against the net position of all the client positions as stated by brokers like Oanda, FXCM and etc. I THINK that's the standard practice. There is no way they can or will hedge against each individual trader's position.
Make your losses in demo. Earn your profits live.
  • #219
  • Feb 27, 2015 3:03am Feb 27, 2015 3:03am
Quoting Forexia
{quote} Yeah but from the broker's point of view, that's not his problem. That's LP's problem if the broker had operated in a pure order-matching agent model. If the broker had specifically stated the counterparty of the trade is the LP to the retail trader and vice versa then if anything happens the LP would go after the trader and etc. But then again, there is the issue of anonymity, we are not supposed to know the identity of the counterparty of our transaction, nor of us. That's the beauty of the OTC market; it's the appeal of the hush hushness....
This what we call counterparty's risk.

Even if for retails it is not so important to know who is the counterparty, things are differents for funds for instance because clients want to know who is the counterparty in case of insolvency... For a moment liquidity providers stopped working with FXCM... The only reason why eretails can access to markets is because the broker has to pay clients losses if clients can't. He is the guarantee. That’s why market making is less risky for them.

<p>
Quoting triger88990
{quote} What do you think they just hedge the risk of the entire book, because if they try to hedge each individual trade and be in an out of the market is an extra cost for them as they are giving away the spread, pay extra commissions, so in this regard they only hedge to bring the risk limit in line with the permitted risk levels set by the company and regulatory body. What's the standard practice?
They don't hedge all clients positions. They match clients orders each others : profits and losses and they always have positions on markets to protect themselves from clients' earning in the case where winning trades are higher than loosing trades.
  • #220
  • Feb 27, 2015 3:21am Feb 27, 2015 3:21am
Quoting MaximeCau
{quote} What ? It is an obligation for them to partial hedge clients exposure on markets. Thats one of the regulations' rules.
I guess the hedging rules will vary with the regulatory environments brokers operate in which might be significantly different in the US, UK or Cyprus...

But in a CHF like debacle, one can assume:

MM business model: My clients' losses are my gains.
ECN business model: My clients' (irrecuperable) losses are my losses.
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