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Are we all enemies at the forex market?

  • #41
  • Oct 14, 2007 7:05pm Oct 14, 2007 7:05pm
Hello tunera , ok understood

So I see what you mean you just trade a different strategy than I do which is why there was a misunderstanding

I would actually never hedge under normal market conditions , I mean a real turmoil not just a move of against my positions

well regarding good trades , I do not think it is reasonable to put a stop-loss of 20 pips or hunt a profit of 10 pips , no matter which pair is traded


By the way there are brokers who allow to trade interbank , just the requirements are pretty high and the minimum lot size would be 100K

andrew
  • #42
  • Oct 17, 2007 11:05am Oct 17, 2007 11:05am
I didn't read this whole thread but I will say what I know. I went for an interview with a known FX retail firm and I watched the head dealing desk trader in action for about an hour. Here are the main things that I noticed:

1. When margin calls were in effect he would have to authorize them. (I don't know why this wasn't automatically done by a computer)

2. There was a constant show of the firms over all net position in each currency. The traders job was to keep the firm's risk hedged but also use his judgement to trade for short term scalps. He actually placed one scalp trade while I was there for a profit of 6 pips in the Euro with a $6,000,000.00 position size.

3. There was a platform that showed the whole sale bank rates from Deutsche Bank and surprisingly this firm's retail rates were pretty close for the major pairs. The difference in the wholesale rates was that the retail firm could place trades inside the bid-ask spread like a true market and the minimum lot size was $1,000,000.00.

4. As far as risk goes the trader would hedge firm risk in excess of $1million but there was leaway, at least for this head trader guy, to use his judgement of the market. He also specifically stated that he believed that it is impossible to predict where the market was going. So this firm took zero session to session risk meaning that all risk would be hedged before the start of the next session (US, Europe, and Asia).

In conclusion the biggest things that I took away from my experience there was that retail firms aren't conciously trading against their clients. This firm was VERY concerned with risk. They didn't seem to have any magic system to make tons of money watching client order flow. They made most of their money in small amounts from the spread and from large ultra short term scalp trades which they can do better because of their ability to post orders inside the bid-ask spread. The session change over times are very important do to the retail firms transfering risk.

So in essence they are just true market making firms with very little judgement about market direction. I truthfully didn't learn much that would add to my trading. I guess one might have to go higher up the food chain to the big banks to find any real nuggets of trading wisdom.

That's my two cents.
  • #43
  • Oct 19, 2007 1:13am Oct 19, 2007 1:13am
Quoting Eric615
I didn't read this whole thread but I will say what I know. I went for an interview with a known FX retail firm and I watched the head dealing desk trader in action for about an hour. Here are the main things that I noticed:

1. When margin calls were in effect he would have to authorize them. (I don't know why this wasn't automatically done by a computer)

2. There was a constant show of the firms over all net position in each currency. The traders job was to keep the firm's risk hedged but also use his judgement to trade for short term scalps. He actually placed one scalp trade while I was there for a profit of 6 pips in the Euro with a $6,000,000.00 position size.

3. There was a platform that showed the whole sale bank rates from Deutsche Bank and surprisingly this firm's retail rates were pretty close for the major pairs. The difference in the wholesale rates was that the retail firm could place trades inside the bid-ask spread like a true market and the minimum lot size was $1,000,000.00.

4. As far as risk goes the trader would hedge firm risk in excess of $1million but there was leaway, at least for this head trader guy, to use his judgement of the market. He also specifically stated that he believed that it is impossible to predict where the market was going. So this firm took zero session to session risk meaning that all risk would be hedged before the start of the next session (US, Europe, and Asia).

In conclusion the biggest things that I took away from my experience there was that retail firms aren't conciously trading against their clients. This firm was VERY concerned with risk. They didn't seem to have any magic system to make tons of money watching client order flow. They made most of their money in small amounts from the spread and from large ultra short term scalp trades which they can do better because of their ability to post orders inside the bid-ask spread. The session change over times are very important do to the retail firms transfering risk.

So in essence they are just true market making firms with very little judgement about market direction. I truthfully didn't learn much that would add to my trading. I guess one might have to go higher up the food chain to the big banks to find any real nuggets of trading wisdom.

That's my two cents.

I am sure it is true but this is not their main source of income

The biggest money is made by analyzing their customer's accounts , distance between entry and stop-loss , position size in relation to the account balance , number of entries and exits with the same pair etc.

When analyzed properly risk can be managed very well as they will be able to identify most losers immediately whose money they can bank

and if they see certain things which impose risks to their profits like using stop-losses far away from the entry or a number of entries within one trade or not using stop-losses at all etc. then they will hedge their positions through the liquidty provider
  • #44
  • Oct 19, 2007 8:29am Oct 19, 2007 8:29am
I respect your opinion but the firm that I interviewed with was not concerned with anything that you just talked about. Maybe you have worked for another firm. I'm sure each firm has it's own style. You do have to remember though that these retail firms have NO power to move the market, they are simply too small. It's not as if they are Goldman Sachs making a market in a tech stock that trades 50,000 shares a day. We are talking about the FX market here. The Big Banks that these firms transfer risk to aren't even big enough to fully control the market (though obviously their positions do move it for a time).
  • #45
  • Oct 19, 2007 8:49am Oct 19, 2007 8:49am
Quoting Eric615
I respect your opinion but the firm that I interviewed with was not concerned with anything that you just talked about. Maybe you have worked for another firm. I'm sure each firm has it's own style. You do have to remember though that these retail firms have NO power to move the market, they are simply too small. It's not as if they are Goldman Sachs making a market in a tech stock that trades 50,000 shares a day. We are talking about the FX market here. The Big Banks that these firms transfer risk to aren't even big enough to fully control the market (though obviously their positions do move it for a time).
Yes I see but Forex is not the stock market , with stocks the broker is not your counterparty and all transactions are guaranteed by the exchange

On Forex the broker is your counterparty (basically a simple bookie) and no one is gonna guarantee you anything , the broker can not even hedge their positions anytime they want which is the main reason why the news gamblers have so big problems with their order execution

So basically what I want to say is that on Forex there is no money to be made with the spread , the expenses are simply too high for this

Do you actually know how much it costs to employ all those people who observe the trading accounts , hunt stops , work in the customer support , place n-house trades , customize the platform? and all those internet advertisment campaigns? accounting? all possible website gimmick?

No one is interested in customers paying spread for their mini lots , the account equity this is what they are after.Once you pay money into your FX account the broker thinks (based on serious statistics and experience) that a significant part of that money will be their profit within a specific period of time
  • #46
  • Oct 19, 2007 9:13am Oct 19, 2007 9:13am
try download ALL the demo platform from fxstreet.com, bloomberg, your local bank, or any place where you can see the market price. after you done setup everything, pick a single pair on all platform and monitor it for a month. if 99% of the broker are having almost the same price quote and just fluctuating/differs between 5 - 15 pips, it means the biggest enemy in forex is YOURSELF.
  • #47
  • Oct 20, 2007 2:16am Oct 20, 2007 2:16am
Quoting haha22
try download ALL the demo platform from fxstreet.com, bloomberg, your local bank, or any place where you can see the market price. after you done setup everything, pick a single pair on all platform and monitor it for a month. if 99% of the broker are having almost the same price quote and just fluctuating/differs between 5 - 15 pips, it means the biggest enemy in forex is YOURSELF.
Yes , this is true but I don't understand why someone would compare the demo accounts? All brokers will present you proper demo accounts with proper execution where you will be able to make great profits.Once you start trading the real thing you will lose your money. why? because there are various ways to manipulate a live account , it is not nessecary to temper with the quotes

For example when I was starting to trade my first broker put me on manual execution meaning that I could not always open or close trades online and needed to call in , the quotes were correct , nevertheless making profits became more complicated when the boker started their attempts to get rid of me (which they were very successful in)

The problem on FX is that you have two risks

1. Trading risk

2. Counterparty Risk

What you are talking about is the trading risk but what about the counterparty risk? Of course you can avoid it if you go to stocks but what if you want to trade currencies?
  • #48
  • Last Post: Oct 20, 2007 6:36am Oct 20, 2007 6:36am
Quoting fx_amateur
Yes , this is true but I don't understand why someone would compare the demo accounts? All brokers will present you proper demo accounts with proper execution where you will be able to make great profits.Once you start trading the real thing you will lose your money. why? because there are various ways to manipulate a live account , it is not nessecary to temper with the quotes

For example when I was starting to trade my first broker put me on manual execution meaning that I could not always open or close trades online and needed to call in , the quotes were correct , nevertheless making profits became more complicated when the boker started their attempts to get rid of me (which they were very successful in)

The problem on FX is that you have two risks

1. Trading risk

2. Counterparty Risk

What you are talking about is the trading risk but what about the counterparty risk? Of course you can avoid it if you go to stocks but what if you want to trade currencies?
i guess your strategy like that is scalping, while some other trader only set their pending order, take profit and stop loss. which is quite rare if getting requote, execution or connection problem.
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