Has anyone noticed negative spreads before?

I have recently seen some negative spreads and actually acted on them which means the bid is higher than the ask. Essentially you begin the trade at a profit.

When I have seen the spread do this it only lasts momentarily so you do have to be somewhat quick/lucky in order to nail an entry like this. Anyone else have this happen? If so, what platform?

Cool! Who's your broker?

MB trading

FXCM believe it or not.





mbqb11,

Are you saying you have seen this as well?

It happens all the time on ECN brokers, though whether it presents a valid arbitrage opportunity is another matter.

I think I need to add that I do NOT believe it is a good idea to enter a trade simply because you may start off up a pip.

Have you seen negative spreads on other brokers? Sounds like an interesting concept.

I wrote a little indicator to track spreads on MT4, because I was curious if MT4 dealers have these changes in spreads also. Surprisingly, on IBFX the spread dropped down to zero on several pairs on 02/25/08 at 08:58:02 GMT

I know this happens on ECNs, but was shocked to see it happen at a dealer. I am still confused as to why. It only lasted of about a second, no real time to get an order in on it, though.

This morning / last night just after the German IFO came out, I was seeing this happening for a few MINUTES and it was 10-15 pips difference. I wanted to take advantage of it, but it freaked me out enough that I didn't (I just recently moved from MM to ECN and wasn't sure if I was really seeing what I was seeing).

I know the theory, but has anyone actually taken advantage of this on a live account with MBT and what was the outcome?
- do you actually end up pips up when the trade opens?
- does the fill actually take place anywhere NEAR the shown price?

Thanks,
Bear

true interbank pricing has variable spreads, tight, big, inverted....that is the brutality of the true market. Market makers do not show true pricing, ECNs do, that why I choose ECNs anyday.

I never tried it, because its extremly risky. You cant use limit orders because of the chance that only one side fills, leaving you with an open position during a high volatility period. If you use market-orders, you can get slippage way beyond 15 pips during news events. The risk far outweighs the possible gain in my opinion.

Maybe its possible with automation and a server proximity solution, but the costs involved for developing and maintaining such a solution are significant, and possibly too high given the available size during the period of negative spreads.

As a rule of thumb, strategies that involves arbitrage-like trading is a no-go for retail traders, because there will always be someone with faster market-access and lower trading-costs than a retail trader with consumer grade internet-connections,who already does this, IF its worth it, especially if it is such an obvious arb like your example.

shrike

Thanks ... That was my thought too, but I was anticipating a 40+ move from where the bid price was anyway and the ask was 10 or so below that. I wasn't concerned with it not making any pips, but if MBT would even allow the trade at all. I've personally had LIMIT orders open for a tp that gave me another 7 pips because it wasn't filled on target. I do see your risk point though and I guess that was part of the reason I froze looking at the screen (I typically don't trade news).

Bear

This just happened to me as well on FXCM and I that's how I ended up on this thread searching for the term "negative spread" it was actually -0.9 on the EUR/JPY. I was wondering, how is this even possible!!! I mean why would they give you money to get into a position? I was waiting for a chance to get in with 15lots so I did
Plus I was waiting for the roll over so I was up 6 pips or so in no time!

I remember seeing negative spreads on MB Trading a while back.

Couldn't believe what I was seeing. Of course, it was a nightmare trying to execute a trade!

That's the thing, they don't have a "reason" to do it nor does it matter. It shows that they do try to match the best bid with the best ask from their feed that flows liquid price action from the various banks they deal with.

Its actually pretty refreshing to see in this game.

Does any MT4 broker had that happen?

If you ever think that's happeneing at a MT4 broker, I suggest you double check to make sure that you aren't confusing the bid with the ask.

I've seen this a bunch and taken advantage of it. Once I made over $700 in a few seconds on EUR/AUD just by clicking buy-sell-buy-sell-buy-sell a bunch of times. There was a 20-something inverse spread for several seconds.

I've done it on other pairs too, and would say I've made in the thousands in a years' time. I love it. I feel like I'm beating the banks at their own game.

To an earlier poster who said doing this was "extremely risky," well welcome to forex dude. What isn't risky here?

Not going to reveal my broker or platform, but it is an ECN...I had someone tell me my broker would end up reversing those trades, but that hasn't happened once. Enjoy!!

I've seen this happen many times on FXCM, when I noticed it, it's when their unreliable platform stuffs up, and one side of the price freezes, ie. usdjpy ask price stuck at 106.50 while the market kept going up, say the bid price is 106.6 now, then the spread is -10pips, but from my experience the price is NOT tradable, it will give me the "order rejected, market moved" message, but I didn't try it everytime, maybe sometime it'll work, but it'll probably get reversed back anyway..