Forex Question

[waveslider]

Hi,

I have never traded forex before, and don't really understand the pricing / fees.

I want to set forward a system to see if it is actually trade-able with slippage and commissions.

Since Forex trades 24 hours, it looks like liquidity would be the main issue with the system.

Does anyone trade forex with tick or volume charts? That might alleviate the problem a bit.

Anyway, this system is set to a ten minute chart trading the USD/CAD.

Over the past 4 years the avg. winning trade is approx. $150, the avg losing trade is $250.

This is trading one contract.

The entries and exits are on limit orders.

Can I expect that the winners would be seriously eroded by pip spreads?

My broker is Tradestation if that makes a difference.

Thanks is advance for your advice!

[waveslider]

correction - sorry, they were not limit orders, but market orders

[notouch]

Liquidity wouldn't be an issue because your "broker" is a bucketshop and would always be on the other side of every trade. They claim to make money from the spread but actually make money by taking the other side of your trade. Slippage would be a massive issue.

[cooter]

That, and cancelled trades, and the usual bucketshop goings-on.

If you can afford it, waveslider, try trading Currency Futures instead of spot FX.

At least you'll know where you stand once you start making real money.

[waveslider]

Thanks for the response. What are the margin requirements/leverage for futures vs. spot?

[cooter]

Don't know much about spot FX, so I can't comment.

Here's the CME page on Currency Futures:

Outright Rates for CME Currency Futures Created by PBIS system

Your broker should be able to give you much better rates - if you ask nicely.

One noticeable difference is the direct commissions on Currency FX. In Spot FX brokers get their "vig" from the difference between the bid and ask spread, and don't normally charge a per trade commission.

Currency FX is just like the other regulated futures - you've got exchange fees, regulatory fees, and broker commissions for each trade - and on each side (in and out).

[waveslider]

Thanks Cooter (is that from dukes of hazzard?)
Here is an email from TS I got regarding forex. I just moved to Canada from the Us so am much more interested in hedging b/w currencies now. Any comments on this email?


Tighter spreads with no markups/markdowns
Fixed spreads are a way for FCMs to markup or markdown the best bid or offer. This is usually done to hide their fee into the price of the currency pair instead of displaying their best quote. Of course, there are costs incurred in transacting trades, so when you see an FCM claim they have “no commission” you should be aware they are making money with the built-in markup/markdown in the spread.

TradeStation Securities has nothing to hide. We understand traders need the tightest possible spreads, and with the release of TradeStation 8.3 will offer tighter spreads with no markups/markdowns and openly display a low commission rate. With our new upfront commission pricing you’ll know exactly what you’re paying for — and allow us to offer you narrower price spreads.

New Forex Commission Structure
We quote the best bid/offer from multiple large banks and charge a separate transparent commission, which include exchange and regulatory fees.

TradeStation Forex
EXAMPLE #1: 100,000 EURUSD = $2.67 (0.00002 X 133,333*)

EXAMPLE #2: 100,000 GBPUSD = $4.00 (0.00002 X 200,000**)

EXAMPLE #3: 100,000 EURJPY = $2.67 (0.00002 X 133,333***)

* Assuming fill price of 1.33333
** Assuming fill price of 2.00000
*** Assuming fill price of 160.000 and conversion rate = 1 USD : 120 JPY

[walterw]

Wave : you want to check oanda.com they have a spread/execution policy that its worth looking... I actually dont trade forex, but have acct with them and so far I believe they got one of the best spreads... no second pricing... etc... also no minimums and flexicontracts... hope helps cheers Walter.

[notouch]

Oanda are one of the worst bucketshops of them all and have been known to increase their GBP/USD spread to 200 pips during data releases. Waveslider, these bucketshops are just glorified bookmakers who offer 400:1 leverage in an attempt to get their gullible punters to part with their money.

[waveslider]

So is .2 basis points too much slippage? What broker do you use notouch? TS says they get the best quote from multiple large banks, is that just BS in your opinion?
thanks