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Honest truth about forex.....

c3po
Dec 05 2016 at 16:21
51 сообщений
AlGauthier posted:
Great discussion overall!
I would add just the point that across the EU there is a directive that says the broker should provide always the best possible execution of the orders. I think that any case where the price differs significantly from a publicly respected source, such as Bloomberg, could be filed to the regulators for investigation. Not sure if such execution rule exists in the US though.


USA regulators only help the Broker - their peers... no way they will help the small investor. If that was the case they woudln't have passed the draconian laws to prohibit Forex for USA citizens. That's ok, I don't need them and I will have the last laugh

jasonrogers (jasonrogers)
Dec 06 2016 at 08:34
272 сообщений
ben08in posted:
It's good that you provide clarity on the subject. Based on the facts you mentioned, you got me interested in learning more about the average slippage for that period and if you have more recent data to share with us.


Great questions, Ben!

You can find more information about FXCM's trade execution on this webpage: https://www.fxcm.com/uk/why-fxcm/execution/?CMP=SFS-70160000000MusRAAS

For detailed stats regarding positive and negative slippage, you can click on Price Improvements section and then on the FULL FXCM Statistics (PDF).

ben08in posted:
Still, I am wondering why FXCM is using the DD for smaller accounts?


In regards to trade execution, FXCM innovated transparency in the forex market with competitive and market-driven No Dealing Desk (NDD) execution. We would love to provide NDD on all accounts, and actually did so in the past. Even now that we offer both NDD and DD account types, the bulk of our revenue still comes from our highest volume traders on the NDD model.

However, in running the numbers, we found that below the 5k balance threshold, it is hard for us to recoup in commissions the fixed costs that go into providing customer support for any account. Smaller brokers that predominantly had clients with smaller account balances struggled with this fact, which is why they no longer operate in the US. We ended up inheriting a lot of their business.

The DD model allows us to provide service even to traders with a $50 account balance. And as mentioned in my previous post, FXCM uses the same base price for DD execution on Mini accounts (before adding the spread markup) as the base price we use for our NDD execution (before adding the commission). That's a key reason traders can have confidence trading with us regardless of the account type they choose.

Our NDD and DD account options are a win-win for traders. Traders with 5k to invest or more can set up a Standard NDD account with FXCM. Traders with less than 5k can still trade on a Mini account with DD prices based on our NDD feed.

ben08in posted:
When it comes to the stop hunting, the information you wrote does not actually prove that FXCM is not doing it for accounts less than 5k. c3po mentioned that that FXCM is waiting for the stops to get set so this means FXCM can see the stop loss levels of the traders if I understood correctly. Is FXCM trading against the traders with accounts smaller than 5k?
It could be good if c3po provides some illustration of his statement so we can all see the case 😄


As explained above, our DD price for Mini accounts differs from the NDD price for Standard accounts by a fixed amount (the pip markup). Since our DD price moves up and down in lockstep with our NDD price (something you can confirm for yourself by having demo or live accounts of each type open side by side) there is no question of us hunting stops on either execution model.

Actually, it is c3po who has not proved his case regarding alleged stop hunting. I believe he is confused about how to take into account the bid-ask spread when he is in short position, which is why he thinks we are targeting short positions specifically. I will address this in more detail in another post, but when you are a short trade, it is the ask or buy price that can trigger your stop loss order. However, the chart shows you the bid or sell price. That means you have to add the spread yourself and keep this in mind when trading.

jasonrogers (jasonrogers)
Dec 06 2016 at 08:35
272 сообщений
c3po posted:
I didn't say FXCM hunts stops. i said THEY CHEAT by jumping their Ask line up a factor of 10 immediately before a selloff.


Unfortunately, there seems to be some confusion here @c3po

What you have described is the normal spread widening that can occur when a major news event is announced. That's why you notice it happening before a major selloff. On our No Dealing Desk (NDD) forex execution model, FXCM takes the best bid price and the best ask price from our competing liquidity providers.



The spreads you see are based on the spreads from these competing firms. During major news events, liquidity providers will widen their spreads to manage their risk which is why you will see spreads widen on your platform. If you get stopped out of your short position due to this spread widening, it means you set your stop too tightly for the market conditions of a major news event.

You said you believe we are specifically targeting short positions. (Why would we target short but not long positions?) That tells me you are not correctly taking into account the bid-ask spread when you look at your charts. While your charts show the bid or sell price in the market, it is the ask or buy price that would trigger your stop on short position.

CC: @CliveCampbell @togr @snapdragon1970 @SaltyWaters @NEEnah

snapdragon1970 (snapdragon1970)
Dec 06 2016 at 12:44
1944 сообщений
Lots of brokers to choose from , if your not happy with the provider, change , don't trade around major events if the spreads are crazy,if your concerned about stop hunting change your trading habits.

focusedfinance
Dec 06 2016 at 15:28
14 сообщений
The forex industry needs to do a better job of educating prospective traders. The DD/NDD discussions are getting tiresome. The stop hunt discussions are also tiresome.

Pick up the phone, speak to a PERSON on any of the above liquidity providers and the conversation will be
Customer: What is the rate on whatever currency?
Dealer/Sales Person: whatever the f*** I want it to be

There is no law of one price. There is no law of orderly markets (dealers have a code of conduct thing where they agree to do their best to try keep a lid on things and not deliberately cause instability). There is an agency problem because banks want to make money for themselves, but money for them is less money for their clients. Brokers need to get retail 'traders' to understand this.

Add to this that there is very little non-electronic experience within the banks (electronic matching started circa 2000) meaning that there is very little true tradecraft left in the market. I'm 40ish, I started with a bank when I was 19. Yesterday during US ISM PMI I was watching EURUSD futures depth of market and was surprised at what I saw. There was nothing unusual about it other than the manner in which liquidity disappeared around the event and that in itself was not unusual, just that broker DOM feeds show a lot more volume - and I have been watching this stuff for 20 years!

And that is the other thing. There is a difference between volume traded and liquidity. Volume is volume, liquidity is the willingness to buy or sell something and hold it as inventory in the hopes of getting rid of it at a profit 'later'. Its the willingness to look at a large sell order and say 'nah, that guy is wrong, I'll take the other side of the trade'.
Volumes over the past 5 - 10 years have grown. Liquidity has fallen. The result is that price swings are bigger than they used to be.

Even books like Flash Boys are questionable, and Michael Lewis was a trader when I was in high school!

Let me paint a picture. Its 1995. A dealer at a bank can handle 3 phone handsets at one time, he has a reuters terminal which is similar to a really ancient version of Whatsapp and it can only handle 4 conversations at a time. In addition he is wired into 4 or 5 brokers, of which he only likes 2 or 3.

If his USD/JPY price is 120.10/15 in about 10 or 15 seconds he can shout it down his 3 handsets, click into his 3 brokers and then type 10/15 in each of his 4 chats on the dealer.
Standard trade size is $5million. Lets say he has $10 or $15 million to go. It will then take the balance of the minute for the $15million to trade, and for him to go to everyone else and say 'off that' because his price is no longer there.

Its 2015. The same guy can type 10/15 onto 1 machine and have it go out to multiple electronic venues instantaneously, and have the same $15million traded in say 500miliseconds. That is a 120fold acceleration in the speed at which things happen. It also means that if you see 10/15 on screen and take too long to hit the offer (is 500miliseconds really too long?) you will miss the price and get slippage. Can you play silly buggers with HFT? Yes. But at the same time too few prices going to too many venues also creates its own set of problems.

Before complaining about stop hunts stop and think for a moment.
Say the FX market is $1trillion/day. Say 25% of that EUR. That is $250 billion. Now lets say the range on EURUSD is 100pips. Assuming even distribution of volume $2.5billion is traded at each pip of the range. So Mr Retail is some clown with a $50k account with a 10 lot trade and a 50 pip stop. It really doesnt matter where his 10lots/$100k stop loss is, there is another $2.5billion of volume at that price level and if something is going on that makes a person or persons target that price level. Sorry for you - YOU WILL BE STEAMROLLED.

And that is another thing. As I understand it most desks have an intraday limit of about 1 yard/$1 billion. If volume is 2.5yards a pip its a little difficult to run a stop loss and stay within position limits. And even then, it takes stones to get overly aggressive because $250billion per day averages about $3million volume per second. A $500million position is $50k/pip in profit or loss making a 5 pip move more than your salary for the year.

Look, there are times where volume will be a thinner than average and guys will pounce but that will usually be something along the lines of the the guy at Banker's Trust knows the guys at HBOS are short so they push the market just to shaft the HBOS guys (yes, I am using names of banks that no longer exist to avoid legal problems).

I recall a slow morning where 5 or 6 banks colluded to shaft a single dealer because they felt he was 'too arrogant'. And yes, it was funny to hear him panicking and shitting his pants as the market moved against him. The value of a nation's currency (Emerging Market, not G7) moved for no real reason. Some stop losses probably were run but do you think any of us stopped to think about it?

Naaah - we were too busy enjoying our prank.

Now that I think of it. I have watched a situation where two equity futures traders working for the same bank got into a fight because they disliked each other intensely, and Trader A figured out that Trader B had a large position, so Trader A called up all of her mates and encouraged them to join her in a trade against Trader B's position. At one point Trader B was almost in tears cos the loss would have gotten him fired. Dude was begging and pleading and causing a bit of a commotion. I think it only stopped when the head of the desk instructed both of them to settle down.

If you like it, buy it. If you don't sell it.
c3po
Dec 06 2016 at 20:11
51 сообщений
Jason Rogers

to answer you, I didnt mean to say that I know you are targeting them, it appears that way though, however if so, you would target Sell stoplosses by punching your Ask line up from like 3 pips to 30 pips or more to close out the sell. How can you target a long using your Ask price if the trader pays the spread up front? Punching the Bid line 10X away from its price would be too obvious. and I know a sell is closed at Ask price, that doesnt even address it, its like you didnt read the issue, you just copy and pasted a form reply when someone mentions the suspicious Ask price.

If you can explain to me that its ethical to repeatedly change your Ask price every few seconds by a factor of x10 before the news volatility kicks in while the Bid price doesn't change more than x1 to x3 or x4, giving the appearance of 'creating your own volatility with the Ask price', then ill take back the cheat comment.


     

togr (togr)
Dec 07 2016 at 07:41
4862 сообщений
focusedfinance posted:
The forex industry needs to do a better job of educating prospective traders. The DD/NDD discussions are getting tiresome. The stop hunt discussions are also tiresome.

Pick up the phone, speak to a PERSON on any of the above liquidity providers and the conversation will be
Customer: What is the rate on whatever currency?
Dealer/Sales Person: whatever the f*** I want it to be

There is no law of one price. There is no law of orderly markets (dealers have a code of conduct thing where they agree to do their best to try keep a lid on things and not deliberately cause instability). There is an agency problem because banks want to make money for themselves, but money for them is less money for their clients. Brokers need to get retail 'traders' to understand this.

Add to this that there is very little non-electronic experience within the banks (electronic matching started circa 2000) meaning that there is very little true tradecraft left in the market. I'm 40ish, I started with a bank when I was 19. Yesterday during US ISM PMI I was watching EURUSD futures depth of market and was surprised at what I saw. There was nothing unusual about it other than the manner in which liquidity disappeared around the event and that in itself was not unusual, just that broker DOM feeds show a lot more volume - and I have been watching this stuff for 20 years!

And that is the other thing. There is a difference between volume traded and liquidity. Volume is volume, liquidity is the willingness to buy or sell something and hold it as inventory in the hopes of getting rid of it at a profit 'later'. Its the willingness to look at a large sell order and say 'nah, that guy is wrong, I'll take the other side of the trade'.
Volumes over the past 5 - 10 years have grown. Liquidity has fallen. The result is that price swings are bigger than they used to be.

Even books like Flash Boys are questionable, and Michael Lewis was a trader when I was in high school!

Let me paint a picture. Its 1995. A dealer at a bank can handle 3 phone handsets at one time, he has a reuters terminal which is similar to a really ancient version of Whatsapp and it can only handle 4 conversations at a time. In addition he is wired into 4 or 5 brokers, of which he only likes 2 or 3.

If his USD/JPY price is 120.10/15 in about 10 or 15 seconds he can shout it down his 3 handsets, click into his 3 brokers and then type 10/15 in each of his 4 chats on the dealer.
Standard trade size is $5million. Lets say he has $10 or $15 million to go. It will then take the balance of the minute for the $15million to trade, and for him to go to everyone else and say 'off that' because his price is no longer there.

Its 2015. The same guy can type 10/15 onto 1 machine and have it go out to multiple electronic venues instantaneously, and have the same $15million traded in say 500miliseconds. That is a 120fold acceleration in the speed at which things happen. It also means that if you see 10/15 on screen and take too long to hit the offer (is 500miliseconds really too long?) you will miss the price and get slippage. Can you play silly buggers with HFT? Yes. But at the same time too few prices going to too many venues also creates its own set of problems.

Before complaining about stop hunts stop and think for a moment.
Say the FX market is $1trillion/day. Say 25% of that EUR. That is $250 billion. Now lets say the range on EURUSD is 100pips. Assuming even distribution of volume $2.5billion is traded at each pip of the range. So Mr Retail is some clown with a $50k account with a 10 lot trade and a 50 pip stop. It really doesnt matter where his 10lots/$100k stop loss is, there is another $2.5billion of volume at that price level and if something is going on that makes a person or persons target that price level. Sorry for you - YOU WILL BE STEAMROLLED.

And that is another thing. As I understand it most desks have an intraday limit of about 1 yard/$1 billion. If volume is 2.5yards a pip its a little difficult to run a stop loss and stay within position limits. And even then, it takes stones to get overly aggressive because $250billion per day averages about $3million volume per second. A $500million position is $50k/pip in profit or loss making a 5 pip move more than your salary for the year.

Look, there are times where volume will be a thinner than average and guys will pounce but that will usually be something along the lines of the the guy at Banker's Trust knows the guys at HBOS are short so they push the market just to shaft the HBOS guys (yes, I am using names of banks that no longer exist to avoid legal problems).

I recall a slow morning where 5 or 6 banks colluded to shaft a single dealer because they felt he was 'too arrogant'. And yes, it was funny to hear him panicking and shitting his pants as the market moved against him. The value of a nation's currency (Emerging Market, not G7) moved for no real reason. Some stop losses probably were run but do you think any of us stopped to think about it?

Naaah - we were too busy enjoying our prank.

Now that I think of it. I have watched a situation where two equity futures traders working for the same bank got into a fight because they disliked each other intensely, and Trader A figured out that Trader B had a large position, so Trader A called up all of her mates and encouraged them to join her in a trade against Trader B's position. At one point Trader B was almost in tears cos the loss would have gotten him fired. Dude was begging and pleading and causing a bit of a commotion. I think it only stopped when the head of the desk instructed both of them to settle down.


Thats a nonsense, forex industry needs to make profit. To make a profit they simply dont care and let trade anyone with no knowledge just to earn commissions.
Is it right? No
Is it ethics? No.

But thats the way it is.
Everyone know these phone calls persuading promising profits and bonuses, etc...
The only goal of this is to make profit. Thats what brokers do.

Smart trader do the same - profit. Regardless the trading approach, if it works dont change it and vice versa.

jasonrogers (jasonrogers)
Dec 07 2016 at 07:55
272 сообщений
c3po posted:
Jason Rogers

to answer you, I didnt mean to say that I know you are targeting them, it appears that way though, however if so, you would target Sell stoplosses by punching your Ask line up from like 3 pips to 30 pips or more to close out the sell.


Thanks for your reply, @c3po

I would like to address your concerns. Could you provide an example of a time when you believe this happened? We can look at what happened together.

MC85
Dec 07 2016 at 13:51
48 сообщений
togr posted:
To make a profit they simply dont care and let trade anyone with no knowledge just to earn commissions.


Or earn from client losses if the casino market making model is applied... I agree with you about the ethics as well!
I see quite an epic discussion evolved around this topic. Such things are quite sensitive for any trader!

snapdragon1970 (snapdragon1970)
Dec 07 2016 at 14:10
1944 сообщений
By Philip Blenkinsop
BRUSSELS (Reuters) – The European Commission has fined Credit Agricole , HSBC and JPMorgan Chase a total of 485 million euros (412.37 million pound) for their alleged participation in a cartel to manipulate the price of the Euribor financial benchmark.
The Commission said on Wednesday they were part of a seven-bank cartel that colluded between September 2005 and May 2008 to distort the Euribor interest rate which was set using quotes submitted by a panel of banks and is widely used in international money markets.
JPMorgan Chase was fined 337.2 million euros and Credit Agricole 114.7 million euros for five-month involvements in the cartel. HSBC was set to pay 33.6 million euros for participating in the cartel for just one month.
All three insisted they had not engaged in any wrongdoing.
“We will continue to vigorously defend our position against these allegations, including through possible appeals to the European courts,” JPMorgan said.
HSBC said it would consider its legal options.
Credit Agricole said it would appeal against the Commission’s decision, adding the fine would have no impact on its 2016 results given it had already taken provisions.
Deutsche Bank , RBS and Societe Generale admitted guilt in December 2013 and were fined 824.6 million euros, the sixth largest collective cartel fine ever handed down by the European Commission. Barclays avoided a penalty because it alerted the Commission.
The Commission found a series of chatroom messages between the traders at the banks congratulating each other on their actions.
“On days when traders received money calculated on the basis of Euribor, (they) had an interest in a high Euribor rate. On days when a trader needed to pay … he would want to have a low Euribor rate,” EU competition commissioner Margrethe Vestager said.
“The participation in such schemes was very lucrative for the banks … tiny, tiny movements in the Euribor rate can have a huge impact because of the volumes of trading,” she added.
The Bank for International Settlements put the market value of over-the-counter interest (OTC) rate derivative contracts in euros at $6.4 trillion in the first half of 2016, 31 percent of all OTC derivatives. Such trades would typically be based on financial benchmark rates such as Euribor.
U.S. and European regulators have so far handed down large fines to more than 10 banks and brokerages for rigging the London interbank offered rate (Libor), used for various currencies including the yen, and its euro cousin Euribor.

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