I had this come up on another trading forum that I'm on and it got me thinking... The forum in question is mostly filled with equities and derivatives traders, all of whom tend to be of the opinion that Forex is not beatable by the retail trader in the long run. I have been posting my results there and the topic that has come up is that of commissions. I currently trade on an ECN platform and pay around $7 round-turn. Given that my standard lot size is 0.2 that usually works out to around $1.40 on EUR/USD. That doesn't sound bad, but looking at my total stats, it just seems so much worse.
My average trade in gross is currently $5.28. Average commission is $1.57. So the commission makes up just under 30% for my current return. Although, I'm being told left and right by most of these stock guys (a lot of whom have spent years as institutional traders/floor traders, etc) that my current rate of return is unsustainable (probably true) and that I'm on a lucky streak where the commissions will eventually be the downfall of my account once my "luck" runs out.
I try not to let detractors get in my head too much, but it raises an interesting point. Are we spending too much on commissions in ECN to have a positive expected value? I haven't had good experiences with non-ECN trading and have been of the opinion that it creates a conflict of interest between the broker and client wherein the market maker needs the client to lose to avoid liability... I don't know. Thoughts anyone?
My average trade in gross is currently $5.28. Average commission is $1.57. So the commission makes up just under 30% for my current return. Although, I'm being told left and right by most of these stock guys (a lot of whom have spent years as institutional traders/floor traders, etc) that my current rate of return is unsustainable (probably true) and that I'm on a lucky streak where the commissions will eventually be the downfall of my account once my "luck" runs out.
I try not to let detractors get in my head too much, but it raises an interesting point. Are we spending too much on commissions in ECN to have a positive expected value? I haven't had good experiences with non-ECN trading and have been of the opinion that it creates a conflict of interest between the broker and client wherein the market maker needs the client to lose to avoid liability... I don't know. Thoughts anyone?
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