Market Makers & ECN’s, Is the grass greener?

I had a 45 minute chat with a market maker broker in the UK last week and amongst other things this topic of server verses pc sided info was discussed. I asked him about the practice of sweeping the stops out and he gave some very good answers which I know personally to be true. This is a government licensed broker by the way. Anyway, one development was with the new platform soon to be out from metatrader, MT5. One of its features supposedly will be the ability to have an EA on the server side. Obviously I asked about security of the EA from prying eyes, but other than that, this would be a great benefit as I can see it, because it's a fact, if your PC goes on the blink, so does your exit if you have an open order. If you had the EA server sided, there would be no down time and therefore you could trade with the stops or whatever exit strategy desired, and the broker would never know your settings. But, personally, I don't believe a "reputable" broker sweeps stops. If they did, it would get noticed fairly quickly and ruin their reputation. what to speak of court cases.

The other point I would like to say is because there isn't a commission spread with the ECN broker, it seems the ECN is a little bit cheaper per trade, but not much. I have also sat and watched the market prices compare while trading for hours and they are usually the same with little delay. On top of this, the MM company I spoke to is aware of the ECN threat and they are working on a new deal for customers to tie in with MT5 that is like a semi ECN. The spread will reduce to 1 or less and the features of ECN will be all there, but just not straight to the interbank market due to the limitations of the metatrader platform. What do I care if I am getting the same service with less added cost of things like paying to have my money sent to me. It's free with the MM broker because I have a UK bank account. As others have said, ECN has it's merits, but its not by far as great as companies like MB Trading would have you believe. Yes, when I get into some big serious trading, I most likely will use ECN, but it won't be MB trading, that's for sure. They are the bucket shop of ECN brokers. To each their own, I just wanted to share some ideas. Well, that's all, happy trading!

I have had many nice chats with brokers over the years. These chats area always especially optimistic when you are a prospective client. However, with many brokers, these conversations are not near as nice when there is an execution descrepency.

I have talked to a many traders who are very enthusiastic about brokers following a conversation with on of their salesman. And, in most cases, this excitement and enthusiasm quickly fades when the actual trading starts.

If you want unbiased, real information about what a broker can deliver. Talk to your fellow Forex Factory traders. Let them tell you about their actual personal experiences.

Personally I like to see a platform thats not manipulated by price makers, has depth of volume, tight spreads and is easy to use.
If brokerage is your concern at $30USD per Million you are still playing in the sandpit and FX is probabaly not for you.
The criteria I have listed above is what the interbank guys want, therefore I think the retail punter should at least aim for that also.
With some platforms who have charts etc.. theoretically you are paying for that by their spreads.
You are better off buying a seperate chart package from a respected source.

Reliable, multiple source charting/price feed is essential to smart trading rather you do business with market maker or an ecn style broker. I use e-signal which has dozens of independent data sources that can be used as composite or singled out. Having this data at my disposal has helped me resolve multiple disputes. I would not trade without it.

Amen to that !!!

Yes you have answered your question.
On another note,even the credibility of ECNs itself may be questioned.Some of these "ECNs" may not be true ECNs, and may be going through a dealing desk. It is impossible to verify for sure because of the lack of regulation governing forex brokers.It is impossible to verify for sure because of the lack of regulation governing forex brokers
One simple principle i keep in mind :
"Deposit as little money with your broker as you need for trading, and withdraw your profits when they exceed a certain amount. Keep the rest of your trading capital in your own bank accounts which are probably government-insured."

Agree.
IB can trade many others things round the globe

This is a request for the admin of this site to remove my original post 161. The reason being I have just noticed my replies to comments made on that post have been deleted.

I take offense at having the posts defending my opinions being removed while the criticism has remained. It has been made clear that honest debate does not exist with this person and I have no desire to be part of this thread nor have I posted further to the last post I made.

This type of censorship is similar to what I would expect from dishonest persons such as the author. I do not believe this site is dishonest and therefore request that if the author is allowed to make the comments he has and then delete my responses, then please allow me the fairness of deleting my original post number 161 and this post also. I want nothing to do with this person and his cheating ways.

Note: If post 161 is not deleted and this one is, may the site admin please leave me a PM stating the reasons. If I do not receive this I will email the site admin with a copy of this post to ensure that the site admin understands why I am asking for this.

Thank you, Raghu

Other solution is to host your trading desktop or on a remote server that run inside a data center. This will provide a highly evailable environment for the internet and the operating system.

Are you saying that IB is one of the best ECN if you can't afford Dukascopy?

After reading the Broker Discussion thread from Darkstar, this is one is a nice complementary. thanks FXO-

Definitely changed my perception of the Brokers and the Forex MArket.

Just finished reading this thread. Great job to everyone who posted.
I learned a few things that helped me. Thanks for starting it FXO,
the first post was very informative.

AZ

PS; Does anyone have an opinion on ATC Brokers

If I have to compare the three brokers MBT, IB and Hot Spot, then I could just two of them as I personally have experience with IB and Hot Spot. Each of them has advantages and disadvantages. With IB, liquidity is greater, and with them you can enter into transactions for smaller amounts, and commissions are lower. Do not be fooled, however, that everything is super! After you close a position, the result of it always stays in currency, which is different from the currency of your account, regardless of what you have been trading! If your account is in USD and you bought 100 000 EUR / USD, then you sold them, the result of the transaction for you will be paid in EUR and not USD, and that is normal practice for all Forex brokers! Then they will re-calculate your profit every day using their own exchange rate for the closure and, if you are accidentally at a loss you will have to pay interest on short EUR. If you decide to quit in short EUR position trough IDEAL, using "Close all non-base currency position" you will have to pay commission once again, and even then it is not clear whether there may have still some residual amount of due to accumulated interest on the previous day .

When trading with small money, you might not notice because the amounts are relatively small, but it is extremely irritating, and in fact you are taken twice a commission for the same thing. With Hot Spot in this problem does not exist, although they have some other features that are annoying. Worst of all is that the liquidity with them is lower. The other thing is that when you decide to close that position and place a limit order inside the spread a miracle-like happens, and nobody wants to conclude a deal with you until the spread widens with extra 1-2 pips and become worse compare to a price, you would have had dealing with a market-maker!

I wouldn’t have noticed it if the same problem exists when I open position! But it doesn’t when placing the opening limit order inside the spread almost always there is someone who will take the opposite trade! This way of trading certainly makes a very poor impression for the broker who offers to its customers so-called ECN trading systems. I haven’t traded trough MBT though it seems that they have quite high commissions. Generally all brokers, including the Hot Spot and IB have found a way to get an extra few pips from your trades respectively you account.

Hey Karol, have you test ami fx, i found their ecn was showing same prices as hotspot but at much lower costs. I still love IB but wanted a second shop with lower account mins.
let me know

AMIFX is not an ECN.

"Advanced Markets is only compensated by a markup between the bid/ask spread. "

Additionally, Advanced Markets needs to raise $10M by May 16th per CFTC cap requirements.

http://www.nfa.futures.org/news/new...?ArticleID=2165

http://www.cftc.gov/stellent/groups...fcmdata1008.pdf

Ah you are correct Trader KGB (great name), ami is an STP broker, I only said ECN to not confuse with a marketmaker, which they clearly are not. Thanks for clearing it up.

I was worried about the net cap myself, and I called over and was told they will have over $20mil on the CFTC site when the next report comes out, not just the $15mil required. The next report should be out at end of month if I am not mistaken. Normally I would be suspicious but the deadline to get the $15 mil was last week, so they must already know the money is in.

I just like ami cause they are not trying to squeeze every nickel out of us, and they know that making the client and the bank happy is most important with an STP model, or else they will get reduced liquidity from the banks or have their feeds turned off.

Not saying they are the best ever but at least they have they are trying to do things the right way.

Trader KGB, which do you prefer STP as Falcon has brought up or ECN and why?

Personally I prefer either over the retail dealing desk model as I feel I am getting closer to "real market". Looking forward to your reply.

As a fund manager; I think your missing the true purpose of an ECN, there ability to manage PAM accounts with enough liquidity… your FCM can not get orders filled larger then 60 standard lots with any consistency. With straight through pricing and direct access to multiple banks ECN’s are able to fill my orders with out doing a manual ticket at a dealing desk and having to “work” the order. You have to look at the (real price) of your order, with most FCM’s, slippage or rejected orders cost retail traders a large percent of there position, so what is the “real” cost of trading through an FCM? As a professional trader with my series 3 series 7 series 62 and 65 I have used a number of FCM and ECN platforms and found good and bad with a number of broker dealers.

There was some talk in the original article about leverage… traders need to understand what leverage really means, its not as simple as 25:1 100:1 200:1 or 400:1 or what ever you have your account leveraged at… you need to understand margin with this. Leverage can be and often is the reason most retail traders lose money and ultimately stop trading…

Leverage
• One of the reasons why so many investor look at the FOREX market is for its unique diversification; however there are other benefits too trading the FOREX market. Many brokerages use leverage to some degree to potentially increase the investors return on investment. Trading the FOREX, you can usually get much higher leverage than you would with stocks, while many traders have heard of the word leverage, few have a clue about what leverage is, how leverage works and how leverage can directly impact their bottom line.
• Leverage is used by investors and companies alike; investors use leverage to increase there return on investment, traders leverage there position by borrowing capitol from the FOREX broker this is calculated by dividing the total transaction value by the amount of margin you are required to put up. FOREX brokers offer some of the highest leveraged trading accounts in any investment arena. Most brokers offer leverage of either 50:1, 100:1 or 200:1 and even 400:1, depending on the broker and the size of the position the investor is trading. Standard trading is done on 100,000 units of currency, so for a trade of this size, the leverage provided is usually 50:1 or 100:1. Leverage of 200:1 and 400:1 is usually used for positions of $50,000 or less. To trade $100,000 of currency, with a margin of 1%, an investor will only have to deposit $1,000 into there FOREX account. The leverage provided on a trade like this is 100:1. Leverage of this size is significantly larger than the 2:1 leverage commonly provided on equities and the 15:1 leverage provided by the futures market. Although 100:1 leverage may seem extremely risky, historically risk is less in the FOREX market compared to equities due to percentage fluctuations in over all value, in the currency market prices historically change by less then 1% during intra day trading.
• What is real leverage verses margin based leverage? Margin based leverage is the simplistic form of leveraging your position, while not necessarily affecting your risk. Whether a trader is required to put up 1% or 2% of the transaction value as margin may not influence his or her profits or losses. This is because the investor can always attribute more than the required margin for any position. What you need to look at is the real leverage, not margin-based leverage.

• To calculate the real leverage you are currently using, simply divide the total face value of your open positions by your trading capital. For example, if you have $10,000 in your account, and you open a $100,000 position (which is equivalent to one standard lot), you will be trading with a 10 times leverage on your account (100,000/10,000). If you trade two standard lots, which is worth $200,000 in face value with $10,000 in your account, then your leverage on the account is 20 times (200,000/10,000). This also means that the margin-based leverage is equal to the maximum real leverage a trader can use. And since most traders do not use their entire accounts as margin for each of their trades, their real leverage tends to differ from their margin-based leverage.

• As a FOREX trader we measure the fluctuations in currencies by PIPs (Price In Point) this is the smallest exchange amount a currency can be broken down into, most currencies are priced using four decimal places, the last place is equal to one PIP or 1/100th of one percent (a 100 PIP move will equal a 1 penny currency revaluation.) This is why leverage in the FOREX is needed, with such small decimal point moves the transaction needs an immense amount of capital for these miniscule price movements to be turned into dollar profits, however when leveraged a trader borrows the capitol needed to turn these fraction of a cent moves into dollar moves. Just remember when using leverage too leverage your position based on your risk tolerance.

What is Margin?
• In the FOREX market the term margin is most often referring to the amount of money required to open a leveraged position. It may also be used to describe the type of account, i.e. margin account; meaning that an account is being traded on borrowed funds.
• Without leverage, or the ability to trade on borrowed funds, a trader placing a standard lot trade in the market would need to post the full contract value of $100,000 in order to have this trade executed. Trading with a margined account allows traders to utilize leverage, meaning that the same $100,000 contract can be placed for an amount of margin determined by the set level of leverage. An account at 100:1 leverage would require $1,000 of margin to place a $100,000 trade. 200:1 is the entry leverage value. Since most brokerages will have margin calls set at different level, exact leverage may vary. Simply stated, trading FOREX on margin increases your buying power. As an example: a trader with $10,000 in a margin account that allows 100:1 leverage, would be able to purchase a maximum of $1,000,000 in currency contracts (10 standard lots). At 100:1 leverage 1% of the contract value is required as collateral.
• By trading on margin, traders can potentially increase their total return on investment with less cash outlay. Trading on margin should be used wisely as it magnifies both your potential profits AND potential losses. A good rule of thumb to follow is the higher the margin, the greater the risk.

• Trading with a heavily margined account is a double-edged sword. Trading utilizing high leveraged accounts can potentially increase profits, but it increases your potential losses. Most brokers have standard leverage levels – 100:1, 200:1 or even 400:1. Remember, the higher the leverage, the higher the risk. Traders in the FOREX market are subject to the margin rules set by their chosen brokers. In order to protect themselves and their traders, brokers in the FOREX market set margin requirements and levels at which traders are subject to margin calls. A margin call would occur when a trader is utilizing too much of their available margin (cash deposit towards an open position). Spread across too many loosing trades, an over margined account can give a broker the right to close a trader’s open positions.

Managing a Margin Account
• It is important that traders new to the FOREX market take the time to understand the risk associated with trading in a margined account.
• Every trader should be clear on the parameters of their own account, i.e. at what level does their broker consider them subject to a margin call. Be sure to read the margin agreement in the account application when opening a live account. The positions in a trading account could be partially or totally liquidated should the available margin ("Free Margin") in the account fall to the predetermined threshold. Traders should monitor margin balance on a regular basis.

Calculating Your Margin Capability
• Traders always have the option of setting a lower level of leverage. Doing such may help some traders manage their risk, but bear in mind that a lower level of leverage will of course mean that larger margin deposits will need to be made in order to control the same size contracts.

Margin = (Contract size / Leverage)
• The requirements for leverage may vary with account size or market conditions, and may be changed from time to time at the sole discretion of your broker. Please refer to your trading agreement for details.
• If maximum leverage is employed, traders must maintain the minimum margin requirement on their open positions at all times. It is the traders responsibility to monitor the margin account balance. Your broker has the right to liquidate any or all open positions whenever a trader's minimum margin requirement is not maintained. This is an important risk management feature designed to strictly limit trading losses in your account and prevent the broker from sustaining losses.

Forex,

Your encyclopedic overview of margin doesn't have much to do with the thread's subject..

Thanks

Good to hear. With so many shops folding or being bought out lately, the last thing we as retail traders need is even fewer options amongst well capitalized brokers.