FXCM and "no-slippage"

One of the forum members told me that it seems that FXCM doesn't guarantee fills on entries.
I couldn't believe it, so I chatted with several reps. I pasted the last lines, because the chats were very long.
At the bottom is a copy of another chat I had at the beginning of this year, where they told me that the fills are guaranteed, no matter what the mkt conditions are.
Although they advertise with "no-slippage", they don't guarantee no-slippage.
According to the last rep I spoke with, any professional trader should know this.


you: supervisor said ...
FXCM: ok
FXCM: i think i understand
FXCM: ok
FXCM: go ahead
you: that there will be slippage on it
you: during abnormal mkt conditions
you: for a straddle trade
you: so as I understand in correctly
you: there's no guarantee for entry fills
you: and slippage may occur
FXCM: for certain traders
FXCM: who consistently place entry orders filled at off market prices as per our guarantee, they have bene notified ahead of time
FXCM: that their entries cannot be guaranteed and that they should
FXCM: use market orders to position themselves in the market and take a position
FXCM: witha cacluated risk
FXCM: claculated risk
FXCM: Those traders however represetn about .001% of our client base
FXCM: and are professional traders who know
FXCM: that to fill an order off market is ludicrous. and dopesnt exist
FXCM: they understand that the larger a compnay, the better the price, and they know that trading with us, theyll get the best.
FXCM: they understand that our market environment is unrealistic
FXCM: and that it exists nowhere else in the world.
you: well that's the difference between electronic trading and institutional
FXCM: they also understand that that means sometimes, it is not perfect.
FXCM: actually
FXCM: there is a bigger difference
FXCM: between electronic trading and institutional
FXCM: namely
FXCM: no FIXED spreads
FXCM: in institutional trading, sorads are 30-50 pips
FXCM: spreads- 30-50 pips or non existent
you: I always have a 5pip spread for institutional trading
FXCM: that is they dont make a market
you: +slipapge
you: slippage
FXCM: slippage is also another featuer
FXCM: of institutional trading
FXCM: as well, as lack of price transparency
FXCM: as well as Indicative pricing
you: I have both
you: am using electronic for the "guaranteed" fills and no slippage
FXCM: right.
you: but anyway
you: the point is
you: that FXCM doesn't guarantee the entry orders. But only tries to honor it.
you: although it has been said several times in the past, that they guarantee the entry, no matter what prices are traded during the gap
you: it's just that I'm not happy with this change
FXCM: so, just quickly,
FXCM: (well come back to that conversation if you like about the guarantee)...
FXCM: but first i want to clarify something conceptual
you: ok
FXCM: regardless of our policy,
FXCM: do you think or expect that an order should be filled when a price is not traded at >?
FXCM: and , if so, how do you expect a dealer to do this?
FXCM: regardless of the market
you: if the company says they will do it, I expect they do it
you: so the answer is yes
you: if they don't do it, they souldn't advertise it
FXCM: indeed, we do however..
FXCM: if the market isnt there, then obviously, evne though we are the largest, and get the best prices, we cannot fill a trade at an off market pirce
FXCM: price
FXCM: even those who read or know about our policy on stops, limits and entries are well aware and understand that
you: ok, but then I see no reason anymore to stick with FXCM.
you: anyway, thanks for your time


========================================================

you: got a question about entry orders and gaps on opening
(FXCM): certainly
you: for example : if I place a limit entry order SHORT EUR/USD at 1.2500
you: and firday the market closes at 1.2550
you: Let's say Sunday the market opens with a gap
you: at 1.2500 due to the G7
you: will my entry order be filled at 1.2550?or ignored? or filled at market order?

(FXCM): your entry order will be triggered exactly at the rate that you set it

you: sorry open at 1.2450

(FXCM): regardless of the market gap
(FXCM): that is the great thing about a no slippage policy
(FXCM): so that you wil be triggered on all stops, limits and entry orders
you: Ok, I just wanted to make sure
(FXCM): exactly at the rate that you designate
(FXCM): absoltuely
(FXCM): how is your trading going?
you: as some companies advertise with no-slippage, but they don't honor this with market gaps
you: trading is doing pretty well
(FXCM): i see
(FXCM): we absolutely honor these
(FXCM): even in market gaps

But as I told here before, Why not instead of using entry orders, just buy eur with your entry point as a stop loss and sell gbp with the same stop loss.

and because stoplosses are guarenteed, there suppose to be no problem with that.

Regards.

Here is what FXCM wrote on www.fxstreet.com

FXCM
On Friday, March 5 of 2004, the EUR/USD price moved 200 pips in a single hour. Not all brokerage forex firms handled the move in the same way. Some brokerage firms simply did not execute orders, some provided trade fills with prices way off the market, and one firm provided their clients with superior execution. FXCM honored its "no slippage pledge" and executed stop-loss orders exactly at the price specified on the orders. FXCM is able to honor our no slippage pledge even in volatile markets because the firm is financially secure, with over $30 million in firm capital and a veteran dealing desk.

I trade with Refco (same as FXCM). I placed EUR/USD straddle trade on 6th Aug 2004 Just before NFP Fundamental news My Entry order was filled correctly and made +190 Pips profit.

Mkcky

Will you please explain exactly how you straddle trade?
If you can please give the details for the aug 6th.
what time did you put your entry orders, stop losses, limits, when you exited and why etc.

I was watching the FXCM prices on Friday (although I don't trade with them) and noticed that EUR/USD actually FELL 30 pips upon news before skyrocketing. I didn't see this spike down in other brokers' price feed. Can anyone using FXCM brokerage confirm this?

Thank you very much,
Bonete

Well a cynic would say they took out as many stops as they could get away with before taking their quote up. I have had this from a trustworthy source in that the first price after the release was some twenty points above the market so that would be 1.2080ish and it went north of there like lightning. I've been told online brokers rarely put your trades into the market instead they balance them against other clients and so by "managing" stops they can improve their profits and reduce the number of winning clients. I suppose FXCM can do what they like because really they are doing people a favour by letting them trade with just a few hundred dollars. The difference is when your trades hit the market then the bank does all it can to help you. Ideally I want to move to banks such as UBS but until I have the capital, I will just use online brokers for position trades and stick to options for news trading.

On sidekick's post it sounds like fxcm wants to use the slippage on some traders who abuse the straddle technique even though they guaranteed "no slippage". Why would a broker do something like that? Make the trader lose more $$? They already make $ from pip spreads. Sorry, I don't understand much how the dealing works with them brokers. I see that forex.com the sponsor of this forum has "guaranteed fills"; would they do the same?

The certainty of guaranteed fills on entries depends on many factors not only with FXCM but also with other forex brokers. First look at your trading contract or appendix, there might be an statement there that Broker__ guarantee only a fill on entries at a certain amount say up $10,000,000. Often times, its says that in abnormal market conditions, they cannot guarantee fills and the entries will be filled at the next available price or at rate given to them by their bank if they are not the market maker.

Brokers make money when their clients do. It does not make sense to think that FXCM would want to stop their customers out, because then they lose out on a potential profit. The fact that FXCM recorded prices that other brokers did not is actually a good thing in some ways. Check out this customer support transcript:

you: I guess my question is, how did FXCM record a price drop that other services did not?
FXCM/: well, FXCM deals with 14 of the world's largest banks
FXCM/: moreover, we have more clients than any other retail market
FXCM/: over 50,000 in fact
FXCM/: because of this enormous volume
FXCM/: we are able to access the best prices
you: So you guys probably had more accurate data, is what you're saying?
FXCM/: FXCM is able to maintain the best liquidity with the best prices in the retail market as a result of our tremendous relative size
FXCM/: it is quite simple actually
FXCM/: economies of scale
FXCM/: the more business that you do with a firm
FXCM/: the greater preference they'll give you
FXCM/: we maintain over 800 million in credit lines with the world's 14 largest banks
FXCM/: as a result
FXCM/: we are able to execute our over 1,000,000 trades per month
FXCM/: and get the best real time rates
FXCM/: in situations, such as Friday, where even the largest banks stop offering prices
FXCM/: we were getting preference when the began trading over smaller retail market makers
FXCM/: because we do more business

Hope that's enlightening for ya guys. Good trading.

Hi Will.
I really don't understand how it is a good thing that FXCM records a drop that other brokers don't. If you had done a straddle trade through FXCM, this drop would have filled a short trade which would have clearly ended as a massive loss (or a small loss, if you were using a stoploss, but aloss anyway). This wouldn't have happenned with a broker that didn't record this low price.

Also, I don't see how they make money when you make money. For all I know (which is not much, I must admit ), when you buy a currency, you're buying it from your broker. Therefore, after the currency moves, one of the parties (you or the broker) will have a gain and the other one will have a loss. It's a zero sum game here.

Regards,
Bonete

Bonete,

How do you suppose forex brokers make their money? Brokers like FXCM profit solely from the spread. Size is important here: If the broker can offset your initial spread using another of its own clients, they earn your entire spread. If they have to use an external source, they end up earning the difference.

The point is, at least in the case of this particular broker, your transactions are what make them money. Granted, it doesn't seem to matter wether or not you make or lose money, as they profit either way. However, a trader that is able to survive will likely continue to trade, whereas one that empties their account will probably leave forex altogether. To continue making money off of you, you have to keep trading. It therefore goes against FXCM's best interests for you to stop out and lose money. They want you to survive so you keep paying them

As for how the extra dip is a good thing, think of it this way. That's an extra 30 points of profit if someone recognized that as an awesome time to buy right before it skyrocketed. It may not have been a good thing for straddle traders, but then how often does forex really turn out to be easy money like that

I use FXCM and for the first time decided to trade the news. Now since fundng my $2500 account, as a noob, greenhorn, tenderfoot, whathaveU, I have managed, from April, lto loose $400 of it.

Friday, I got it all back plus another hundred.

I've heard concerns about FXCM and of course shared in those, concerned that my orders would be run over. But all my orders executed and I am quite happy with them. Hurrah for FXCM!

Granted, I was concerned when one of my orders suddenly showed -87 when I set the stop at 15 pips, but when the smoke dissipated, it was stopped properly AND what the moth, rust and bad trading consumed, was RESTORED.

Oanda, on the other hand, continiously, in market spikes, has simply cancelled the order, though I must fool with their upper/lower bounds setting to see what it will take to fill those orders.

Hi Idobrickner,

Here is what I did on 6th Aug. My broker is Refco.

I placed two Limits orders on either side both sides of EUR/USD with diffrence of +/- 30 pips 20 minutes before the news.

(+/- 30 pips difference is very important becuase it take care of spikes most of the time)

Buy EUR/USD 1.2080 SL:1.2070 TP: open
Sell EUR/USD 1.2020 SL:1.2030 TP: open

At 8:32 EST the rates hit the roof. The dealing rates were frozen (During this time do not cancle or manuplate the order. Just be patiance and wait) . After 5 to 7 minutes when screen refreshed the buy order was executed and running 100+ pips profit.

Then I advanced the stop loss locking 50 Pips profit and cancled Sell (EUR/USD 1.2020) trade.

At 13:15 EST I closed Buy position with +190 pips of profit. I close the trade because there was a solid resistance at 1.2270, market was overbrought. and market was going to retrace. (Ref. REFCO/IFR News)

See the risk/reward ratio 1:19 I took risk of 10 pips and made 190 pips. You can only make this happen if broker dose not skip your order and execute at the same price you entered. I have been trading with refco for last six months and they never have skipped or executed my order at diffrent price.

Although I have bad experince with Oanda, during voailitle times they always executed orders 30 to 50 pips away from orignal price eating all the profits and some times giving lots of losses.

I dont think so any brokers deliberately tries not to execute straddle orders. Its just that market moves so fast and some brokers systems are not efficent enough to handle it. None of the brokers want you to loose money. The more you win the more you trade and the more money they make (Spread).



Mkcky

I think 20 minutes before the news is too early. But I do not going to argue with success.

Why not enter 1 minute before the news and put your entry only 15 pips away.

I work with FXCM and its the same as refco. I know it can be done.

Hi ido,

You are right, Placing order 20 minutes before news is too early but dont forget REFCO and FXCM wont allow you to place entry trades 15 Minutes before Important news event like NFP. This is one of reason why I have Entry orders 30 pips apart. Market always moves 10 to 15 pips either way during that 20 minutes and I dont want the order to get executed before news breaks out.


Mkcky

I traded FXCM with a spread at 15 mn before announcement maybe it was even 7 min before. Just today.

LOU

I originally placed orders 20 minutes ahead of time but was adjusting orders on FXCM Friday 5-10 minutes before the event, but maybe that was an exception and it was the first time I traded the news. After 8:30, of course, nothing could be done, until a few minutes later.

Additionally, after what I saw happen to the Euro some months ago, when it was 1.21++ surged upward some 30-40 or more pips or more then came screaming down to 1.89++, I thought it prudent to set the orders 50 pips from the current price. Probably a little cautious, but I did not want to be unnecessarily stopped out. With big moves, loose some pips but the windfall from those is still very nice.

Hang on guys dont start jumping.

REFCO and FXCM didnt allow to to place trade 15 minutes before till recent time may be till few weeks back. I read it here just like two days back that they have removed such restriction thats the good news but on 6th I still used my usual straddle trading policy and put trades 30 pips away.

Mkcky

Here's my chat with refco tonight:


Refcofx: Welcome to RefcoFX. For information on developing a more successful trading strategy, ask a RefcoFX representative about online education in the FX market.
you: i would like to know if refcofx is allowing entry orders before news events?
Refcofx: you can place entry orders before news events yes
you: when did that come back into effect?
Refcofx: the only restriction in terms of placing entry orders around announcements is that you cannot straddle the market with entry orders
you: but ifg straddling is someone's strategy, why wouldn't it be allowed?
you: aren't refco's policy on entry orders before news, the same as fxcm?
Refcofx: I'm not sure what you are referring to when you say "ifg straddling"
Refcofx: FXCM is a separate company so I can't speak for our dealing policies versus theirs
you: you mentioned straddling, the market with entry orders
you: i'm asking why i am not allowed to do it?
Refcofx: because you are not taking a position
Refcofx: around non-farm payrolls the market will very often gap in one direction or another
you: so let's clear this up...
Refcofx: our dealing policy is that we will allow entry orders
Refcofx: provided you take one side of the market
Refcofx: sure
you: let's say tomorrow morning at 8:29am EST, i have a buy entry for eur/usd @1.2200, and a sell entry for 1.2180, and the market is at 1.2190 @8:29am EST, REFCO will do what to my orders?
Refcofx: one moment
you: assuming theres a PPI report tomorrow morning as well
Refcofx: your orders will be cancelled because we dont allow straddling the market with entry orders
you: so if i try straddling right now, it will not allow me to do it???
Refcofx: the orders will display on the platform yes
Refcofx: if the orders are in place at the time of an announcement they will be cancelled
you: can you link me to this policy online, or is there a document you can send me?
Refcofx: this policy is not online
Refcofx: it is our dealing policy
you: how do i get a hold of it, since i am a refcofx customer
Refcofx: and less than 1% of our clients attempt to straddle the market with entry orders around announcements
you: so i don't see why there's a problem with it then
Refcofx: so we make the policy clear if and when the question comes up
Refcofx: the problem is our dealing desk does not provide our clients the ability to place entry orders around announcements for the purpose of straddling the market with entry orders
Refcofx: they can be used to take a position on one side of the market to play the announcement, to play a breakout or whatever the case may be
Refcofx: they are not available to straddle the market around an announcement where the market clearly will gap
Refcofx: in the eyes or our dealing desk, this is not a trade
you: so refcofx does not or will not guarantee a fill during an announcement?
Refcofx: and the convention in the forex market and the interbank market who we trade with on our clients behalf
Refcofx: is that this is not a trade
Refcofx: not on entry orders no
Refcofx: entry orders on announcements are filled at next best price
you: wow, this is interesting news
Refcofx: very often that will be the same price you select in your entry order, but that is not guaranteed
you: what's next best price??
Refcofx: meaning the next price available in the market after your entry price is touched
you: it would be nice if that was mentioned in detail on the website eh
Refcofx: again, this policy affects less than 1% of our clientele
Refcofx: but I can pass your suggestion along
you: so why should it be a problem if it's only 1% of clients using this technique?
Refcofx: for the same reasons mentioned twice above
Refcofx: because our dealing policy is that this is not a trade
Refcofx: whether 1% or 99% are trading this way
you: but it is fine to do when there are no announcements
you: it's a contradiction basically
Refcofx: straddling is discouraged outside of announcements because it is difficult to make money doing so
Refcofx: but you are free to
Refcofx: it is not a contradiction
Refcofx: the policy is very clear of how we handle entry orders around announcements
you: i'd like to post something a fellow refcofx client shared with me if you will...
you: quote: I trade with Refco (same as FXCM). I placed EUR/USD straddle trade on 6th Aug 2004 Just before NFP Fundamental news My Entry order was filled correctly and made +190 Pips profit. en-quote
Refcofx: sure
Refcofx#: one moment
you: just a note, this straddle was placed around 20min before news, and each entry was about 30pips away from market
Refcofx: ok
Refcofx: I can't speak for clients I dont know
you: i'm just telling you that it has been done
Refcofx: I see
you: i'd like to know why you are telling me something different?
you: another question, does refco and fxcm use the same servers for trade station?
Refcofx: again, I can't speak for what someone I dont know is telling
Refcofx: you
Refcofx: they are separate servers
you: because i've set up demo and live accounts with refco and fxcm, and i am able to log onto the same chart station
Refcofx: many of the same products and services we offer are the same yes as we are strategic partners
you: let's assume that the comment above was me, then what can you say about it?
Refcofx: unfortunately this live chat is used to assist our clients with immediate concerns and questions they may have
you: why was i able to place a stradle trade
Refcofx: we cannot hypothesize on hypothetical situations
Refcofx: changing the person doesn't change the fact that this is a hypothetical
Refcofx: if you have any further questions on this matter
Refcofx: please send us an email and we will get back to you
Refcofx: sales@refcofx.com
you: thanks for your time
Refcofx: We appreciate your interest in RefcoFX. We strive to provide all of our clients equal access to our customer support services. In this respect, we courteously request that you limit your usage of the Live Chat in order for other clients to have a fair chance to speak with one of our representatives. Please feel free to direct any further inquiries regarding the FX market through email at sales@refcofx.com
Refcofx: my pleasure
Chat session has ended.

It sounds like the new generation of Forex traders are a tad spoiled. I am from the old age where you didn't have any guarantee on slippage. I am really surprise that any of these online FX brokers even have slippage guarantees. Realistically, how can you fill an order at 1.2200 if the market is at 1.2220? Every time FXCM does that they are taking a 20 pip hit. They can't possibly have the same policy for traders working with million dollar accounts; they would go out of business in a week. Now I don't want to go on and on about how I walked to school in the snow, uphill both ways, but I will tell all of you to be very happy with the way FXCM is conducting their trading because you will not find that in any other market.