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Ecns

  • #1
  • First Post: Nov 25, 2006 6:22am Nov 25, 2006 6:22am
hey guys,
im have the biggest noob question... ive read all about retail brokers and how they take the other side of your trades , my profit becomes their loss like a t a casino and etc... so i'll avoid them entirely.... im new to the forex business and i have a lot of money to play around with... i wish to join up with an ECN because from what i have read up they are the real deal...
but basically my question is , i know it mite sound stupid but say i deposit 100,000 and got really lucky and profited 10 million and i decide to withdraw everything... will my payout become a massive liability for the ECN so that they will bar me from ever doing business with them again? i keep hearing ppl say that the more successful you are the better it is for the ECN so they keep making their commissions and so forth, but is the sky really the limit in dealing with these type of brokers? say i had a crystal ball or something and i kept winning all the time, what will happen?
thanks
  • #2
  • Nov 25, 2006 6:36am Nov 25, 2006 6:36am
sorry, whst is ECN
  • #3
  • Nov 25, 2006 7:19am Nov 25, 2006 7:19am
electronic communication network..
  • #4
  • Nov 25, 2006 8:22am Nov 25, 2006 8:22am
Actually, an ECN in forex is an Electronic Currency Network. It is a pseudo equivalent of the ECN's traders are familiar with in the stock markets.
  • #5
  • Nov 26, 2006 6:48am Nov 26, 2006 6:48am
anyone have an answer to my question?
  • #6
  • Nov 26, 2006 7:58am Nov 26, 2006 7:58am
Quoting suetombo
hey guys,
im have the biggest noob question... ive read all about retail brokers and how they take the other side of your trades , my profit becomes their loss like a t a casino and etc... so i'll avoid them entirely.... im new to the forex business and i have a lot of money to play around with... i wish to join up with an ECN because from what i have read up they are the real deal...
but basically my question is , i know it mite sound stupid but say i deposit 100,000 and got really lucky and profited 10 million and i decide to withdraw everything... will my payout become a massive liability for the ECN so that they will bar me from ever doing business with them again? i keep hearing ppl say that the more successful you are the better it is for the ECN so they keep making their commissions and so forth, but is the sky really the limit in dealing with these type of brokers? say i had a crystal ball or something and i kept winning all the time, what will happen?
thanks
Hi, I like your question. We all know the forex market a zero-sum game. If you have a crystal ball and keep winning, there must be some losers maybe with a stainless steel ball or something. But how do ECNs obtain funds from the losers? I guess one way is that ECNs sign contracts with their sources (banks), if one customer loses, banks collect the money and If one customer wins, banks pay out.
  • #7
  • Nov 26, 2006 9:56am Nov 26, 2006 9:56am
First of all, if you have $100k to open an account you should move directly to Currenex of FXall, the only "true" forex ECNs. IB and MB's may be legitimate ECNs as well, but their reluctance to divulge their counterparty banks makes me a little leery about them. Putting that asside, you should in theory be able to make as much money as you can at an ECN and the broker will thank you for doing so.

On a true ECN, you are not transfering losses or wins between people. You are buying an selling a single block of currency on each side of the transaction. When you buy at 100 and sell at 110, the person who paid you 110 for your position is in effect giving you your profit. At EOD when settlement occurs the 110 will be collected from the counterparty buyer and the 100 will be paid to your counterparty seller. The remaining 10 then gets deposited in your account. For a loss it just works in the opposite direction.

Hopefully that makes sense...
  • #8
  • Nov 26, 2006 5:40pm Nov 26, 2006 5:40pm
Quoting Darkstar
First of all, if you have $100k to open an account you should move directly to Currenex of FXall, the only "true" forex ECNs. IB and MB's may be legitimate ECNs as well, but their reluctance to divulge their counterparty banks makes me a little leery about them. Putting that asside, you should in theory be able to make as much money as you can at an ECN and the broker will thank you for doing so.

On a true ECN, you are not transfering losses or wins between people. You are buying an selling a single block of currency on each side of the transaction. When you buy at 100 and sell at 110, the person who paid you 110 for your position is in effect giving you your profit. At EOD when settlement occurs the 110 will be collected from the counterparty buyer and the 100 will be paid to your counterparty seller. The remaining 10 then gets deposited in your account. For a loss it just works in the opposite direction.

Hopefully that makes sense...
Is there a defined dollar value for an account that would make you an institutional investor? Is it $100,000 or does that vary from place to place?

The google definitions didn't provide values and neither did FXAll.

Jason
  • #9
  • Nov 26, 2006 5:46pm Nov 26, 2006 5:46pm
How about Oanda? Are they market makers? I heard they dont have a dealing desk, so what exactly are they? Will Oanda be a good broker option for suetombo? Thanks.
  • #10
  • Nov 26, 2006 6:06pm Nov 26, 2006 6:06pm
thanks for clarifying that darkstar... forexplayer, i believe oanda is a retail firm with a dealing desk from the research i have done so i wont consider them... but they are among the best of all the retail firms... i've had a look at EFX group, would you recommend these guys?
  • #11
  • Nov 26, 2006 6:09pm Nov 26, 2006 6:09pm
Quoting forexplayer
How about Oanda? Are they market makers? I heard they dont have a dealing desk, so what exactly are they? Will Oanda be a good broker option for suetombo? Thanks.
I don't think Oanda is an ECN broker.
  • #12
  • Nov 26, 2006 6:11pm Nov 26, 2006 6:11pm
Quoting suetombo
thanks for clarifying that darkstar... forexplayer, i believe oanda is a retail firm with a dealing desk from the research i have done so i wont consider them... but they are among the best of all the retail firms... i've had a look at EFX group, would you recommend these guys?
suetombo,
I just had a conversation with Oanda, they dont have a dealing desk. Here is an excerpt from the chat:

fxplayer: Hi, is Oanda a market maker or ECN?
OANDA: OANDA is a market maker.
fxplayer: Do u guys have a dealing desk?
OANDA: We do not have a dealing desk.
fxplayer: Does Oanda take the other side of the trade lik other MM's?
OANDA: No, we hedge clients' positions so that we remain neutral.
fxplayer: So if i buy 1 lot EUR, you BUY and Sell 1 lot EUR at the same point to remain neutral, am i undersanding that correctly?
OANDA: That is the principle. We have sophisticated hedging technology that when positions reach a certain threshold, they are automatically hedged in the interbank market.
fxplayer: So you make all your money only from the spreads as far as the client - oanda relation is concerned?
OANDA: Yes, by the spread and volume of trades.
fxplayer: So u have no interest in whether a client is losing or profitting huge, as long as they are trading with you , you are fine , correct?
OANDA: We prefer a client who is profitable so that they will trade with us for the long term.
fxplayer: In other words, there is no conflict of interest because you are not counterparty to the client's trade, correct?
OANDA: Yes, because our position is neutral
  • #13
  • Nov 26, 2006 6:18pm Nov 26, 2006 6:18pm
forexplayer, Thanks for your great info! This also cleared some of my questions.
  • #14
  • Nov 26, 2006 6:40pm Nov 26, 2006 6:40pm
Ok, that got me thinking more clearly about Oanda now. Let's chalk this out:


Typical MM's Cons
1) They trade against you, so they would want you to lose in order for them to profit. Conflict of interest.
2) They could employ stop hunting in order for them to obtain their objective from point 1 above.
3) They have a dealing desk, so once they see you are profitting heavily or employing a strategy that puts them at a disadvantage( like straddling during volatile news), they could profile you and set you up for manual execution or freeze your platform or slip your orders or do anything else to break your strategy.

Typical MM's Pros
1) They say fixed spreads( but that is really not true, as the spreads go wild during volatile news times and during off hours).


ECN Pros
1) No dealing desk, so you can rest assured they are not trading against you. No conflict of interest.
2) Low spreads
3) Can place order within the spread at times.

ECN Cons
1) They also charge a comission on top of the spread.
2) Usually have a larger min account requirement($10,000 + ???).

Let's see where Oanda stands as compared to the other MMs and ECNs
1) No dealing desk. They make their money from the spreads.
2) Low but variable spreads. But the spreads are the best in the retail forex market 90% of the time ( no one can beat 1.5 pip on the EURO)
3) Low min account opening requirement and you can also trade micro micro lots unlike many other brokers.
4) Platform / charting etc sucks when compared to say MT4. But they are up and running almost 95% of the time. They have their server problems like anyone else in the world, but their uptime is right up there with the best and is accepatable.

Read all about why you would want to go with Oanda out here:
http://fxtrade.oanda.com/whyfxtrade/

I may be wrong on some of my points above , please do correct me. I am still trying to understand the market as far as how the brokers operate and what we as clients should scrutinize while chosing a broker.
  • #15
  • Nov 26, 2006 7:28pm Nov 26, 2006 7:28pm
hmmm interesting indeed, thanks for that forexplayer i'll have a deeper look into this and decide... the thing is i recall hearing some negative stuff about them in the past even though they claim to do none of what u have mentioned in your chat and that slightly kinda puts me off... im looking for the fairest deal out there but i'll definately take them into consideration... i was thinkin about going with an ecn like efx group but now im not even sure.. hmmm i wonder what the others think i shud do..
  • #16
  • Edited Nov 27, 2006 10:23am Nov 26, 2006 7:36pm | Edited Nov 27, 2006 10:23am
Quoting suetombo
hmmm interesting indeed, thanks for that forexplayer i'll have a deeper look into this and decide... the thing is i recall hearing some negative stuff about them in the past even though they claim to do none of what u have mentioned in your chat and that slightly kinda puts me off... im looking for the fairest deal out there but i'll definately take them into consideration... i was thinkin about going with an ecn like efx group but now im not even sure.. hmmm i wonder what the others think i shud do..
suetombo,
While we are it, why dont you spell out some of the bad things you heard about oanda. I was with Oanda during the first 6 months of my forex apprenticeship, so maybe i can answer a few questions. Others can chime in as well.
  • #17
  • Nov 26, 2006 9:40pm Nov 26, 2006 9:40pm
I'm a Forex newbie, but have a demo with EFX. Their EURO spread is usually 1 pip. It should be the same for a live account, shouldn't i?

In2Blues


Quoting forexplayer
2) Low but variable spreads. But the spreads are the best in the retail forex market 90% of the time ( no one can beat 1.5 pip on the EURO)
  • #18
  • Nov 26, 2006 9:48pm Nov 26, 2006 9:48pm
Quoting suetombo
first thing i look out for are user complaints and there are plenty of them
at forexbastards
First of all , the forexbastards site is itself a scam ( what a stupid name), felix doesn't allow any negative review to appear against any service that he promotes or supports. Also, Felix of forexbastards trades the news and uses Oanda. He tried to act too smart with Oanda CEO and tell you what ... he got screwed like an ass. So now, there are several complaints about Oanda on his site.

By the way, every broker has now got smart about news traders( i am one myself). They are widening spreads or slipping orders during news times which makes all these people whine.

Anyother concern with Oanda?
  • #19
  • Nov 27, 2006 7:56am Nov 27, 2006 7:56am
oh i see... well not really i dont have any more concerns so i guess i should open up a demo and familiarize myself with it and see if i like it... thanks for the info mate
  • #20
  • Nov 27, 2006 9:41am Nov 27, 2006 9:41am
Just as a followup, I used Oanda for about a year and was very happy with them. Truth be told, they have almost perfect interbank pricing so I use their charts for my currenex account. The spreads at news time are the only drawback (and ultimately why I left). If you want a fair broker that you can get into for less then $50k, Oanda gets the nod. Good luck in your decision.
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