Turbo's Journal

Quoting steviet

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Hey, hang on there bro - some of us are trying to keep up

Seriously though, great results - keep 'em coming.

Kind Regards
Steve

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Quote

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B USDCAD 1.1419

Quoting Rosco_P

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Went this route as well and got stopped out. It has run as low as 1.1355 today and looks like a much better buy.

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Quoting Tiki Trader

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Turbo you are down almost 100 pips on CAD !!! How far down can this go ?? I am waiting chance to go LONG, but geez... when ???

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Quoting Darkstar

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To understand why, we have to examine some of the mechanics of currenex and how they relate to the structure of the Forex market as a whole.

As I pointed out earlier, when you’re trading on Currenex, you ARE the market. The complication comes in that Forex is a decentralized marketplace. Superficially we all consider EBS to be THE interbank market, but it really is no more valid an exchange then Currenex, FXall, Hotspot, or Reuters. All of these networks collectively constitute the interbank market and consequently the complete Forex market. EBS is just one spoke in that wheel.

The thing that ties them all together is arbitrage. When a bank is providing you a bid on currenex it’s because he sees an opportunity to sell on EBS at a better price. Another bank is offering on EBS because he sees an opportunity to buy on Reuters for a profit. In this way all the submarkets are kept approximately in line with each other, but they will all be definitively unique at any given point in time. If there weren’t these opportunities for intermarket arbitrage, the Forex market would probably be 1/10th the size it is today. The reason for this is that there are no true market makers on the interbank.

That is an important distinction that separates the Forex market from say an equity exchange. On the NYSE for example, each stock has a specialist who is responsible for providing a bid and an offer at all times. In fact they are federally obligated to do so. But in Forex, nobody is required to provide you a market. Ever! The liquidity you see on Currenex or EBS is solely at the whim of the participants in the market to transact. If tomorrow morning every bank in the world decided that they didn’t want to participate in foreign exchange, they could permanently pull their all orders and there isn’t an effin thing anyone can do about it.

Of course that isn’t a realistic possibility, but it highlights the point of the problem were discussing. During news events there is a substantial risk of loss to any bank providing a market. Thankfully there are also substantial opportunities for profit or the market would seize up during the event. But you have to understand that it is solely this opportunity for profit that compels a bank to bid when everyone and their brother wants to sell. If they don’t see an opportunity to profit, then guess what; no bid will be forthcoming. The bank isn’t screwing you when they decide not to buy, their just refusing to be screwed.

So knowing all this, how does it end up with you sitting on an unexpected $26k loss? For that we have to tie it all back to order mechanics.

When a bank is under no obligation to buy, has no desire to buy, and yet you still want to sell, you have to be willing to accept the next best bid. That bid may be 2 pips away or 200 or 2000. The question is, how badly do you want to sell? Using a market order you’re in effect saying I don’t gave a crap what the bid is, just fill my sell order now! In all honesty, you received exactly what you asked for. You may not have known that you would be filled so far away, but that doesn’t alter the fact that you received what you wanted.

This is all common knowledge (or at least it should be) but it still doesn’t explain why you were filled at a rate so dramatically different from what was seen on EBS. The simple truth is that each submarket will have different levels of open interest in the book. On EBS there must have been substantial existing orders to sell at 1.5375. On Reuters there may have been orders at 1.5390. On FXall they may have been at 1.5360. None of these price levels was the “true” or “real” peak of the move because as I pointed out earlier, they were all equally valid. Currenex probably had orders in this area as well, but not in sufficient size to consume all of the buy interest that you and all the other market participants needed.

And that’s the real crux of your problem. If and when there is more interest to buy at a given price point then there is open sell interest to sate it, the offer moves to the next available block of open sell interest. In your case that sell interest was located at 1.5661. The broker didn’t move your fill there and neither did the banks. That just happened to be where enough open interest existed to cover your “fill me at any price now” order. And because currenex is just as valid a component of the interbank market as EBS, Reuters, or FXall, your fill was valid.

So yes, even when a stop order (which is nothing more than a market order that executes when price reaches a certain point) that I put in is filled 100+ points below the lowest point shown on EBS, I would still have the same opinion about its validity. I most certainly will do my best to get that fill reversed, but if at the end of the day my counterparty says no, then that’s what I have to live with. Its part of the risk I assumed when I chose to participate on the interbank.

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Quoting Rosco_P

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That USD/CAD long isn't looking so bad right now .

I should have gone long a 1.3300, but hesistated and seems to be creeping up at the moment.

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Quoting Rosco_P

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I just got on @ 1.3300, hope it goes well.

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Quoting shrike

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Hi turbo,
very interesting journal to follow. Impressive to see how many open trades you manage at a time. I have problems manageing 2 or 3 simultanously

May i ask what charting-software you use to chart currenex?

regards,
shrike

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