Forex Market Structure and Dealers

Hi traders,

I am interested of acquiring information on how to get direct clearance through banks or dealers?!? In another words I would like to get my hands on lower spreads, anywhere from .5 to 1.5 pips.


What effect does it have on the traders behalf, when banks take the opposites side of the trade to provide liquidity? Is there any way to track down what positions banks are holding? I found a video on youtube of some guy saying that he has a proprietary tool that measure the net positions on interbanks... I would like to get your feedback on that please!!

How is it possible to measure volume on currencies, my broker ThinkorSwim told me thats is impossible. Since there are billion dollars floating through the market they said that there is no way to track the volume. I saw a picture on a thread of volume and certain bid and ask volume levels... can anyone direct me to that software.

Best Regards,

TB

What you first have to realize is that someone is always taking the other side of your trade (whether it is a bank, a broker or another trader)

The reason most people on these forums are always talking about STP Models where banks are holding the opposite side of trades is because they dont trust retail brokers which is a bit of a catch 22 because Banks can play just as dirty as any retail Broker its just not worth it for them to run your stop for an extra 100 bucks. but beleive me banks DO manipulate prices to hit certain levels and they WILL screw you if you are playing dirty, but so will any retail broker.

If you trust banks more than a retail broker then yes you would definitly look for a broker that passes their risk directly to a bank via an STP/ECN model or even Sack up the 50 to 100k to trade on a bank platform. that being said i dont know if i would trust these banks either seeing as they are all going under.

Also any decent platform willl show you some indication of market depth. Generaly speaking currencies with the most depth are the ones that are trading the highest volumes. you can check out volumes on something like currenex or retail platforms like Ikon Platinum.

Voldemort,

Thanks for your response. What is catch 22?

Can you elaborate on the following:


"Banks can play just as dirty as any retail Broker its just not worth it for them to run your stop for an extra 100 bucks. but beleive me banks DO manipulate prices to hit certain levels and they WILL screw you if you are playing dirty, but so will any retail broker."



I would assume what you are saying is that retail brokers see all clients stop orders and manipulate the market price to hit the stop price and profit from that difference. In regards to forex, how is the market price actually derived? I have heard that looking into two different brokers, the market price might be different on those brokers quote bid at the same time. ( Those broker's prices are different because of the liquidity in the clearance house they are using? )
If banks really manipulate prices which I would assume just as retail brokers, what other sources or what tools can you use to verify that price actually did not hit that level? How does the "over the counter" perspective come into play? Since the forex markets are "not regulated", what does that really mean?


Best Regards,

TB

The banks do not trade the opposite side when they provide liquidity.

They just match their clients orders and charge a fee (commission) for it.

If you are a bank and want to participate risk-free, you only have to take a position and use slippage to take a piece of the cake for you.

Then you allocate that part elsewhere and keep your profit.

Another way is checking your market depth, reprice your market, enter on it, and fill your oder repricing it again to match any of the pending orders you saw when you verified your order book.

Then you only have to say: "that spike was caused by unexpected market news" and no one will ask you nor investigate why you manipulated the market 80 pips when these news were released.