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Spread Vs. Commission

  • #1
  • First Post: May 14, 2009 11:55am May 14, 2009 11:55am
To have around 2pip spread or to have around 0.5pip spread and pay some commission. What do you think is better?

And for those who know, What do you think about FXCM' ActiveTraders Account?

Thanks
  • #2
  • May 14, 2009 12:59pm May 14, 2009 12:59pm
depends if that is a FIXED 2 pip spread..

typically the commission is fixed but the spread bounces all over the place at a commission broker

I like the fixed spread myself..
taking series 3 and 34
  • #3
  • May 14, 2009 4:42pm May 14, 2009 4:42pm
My money on 2 pips fix spread on eurusd!

This 0.5 pips spread is a myth seen only during those 90% of the times when you are not trading or not going to take any position. And when you do wanna open a position, the spread is usually 1~3 + commission.

Take your pick:
Promise of 0.5 pips (or even lower) spread
Guarantee of 2.0 pips fix spread


BTW.. this so called tigher spread appeals only to those scalpers; ask yourself, are you a scalper?
  • #4
  • May 14, 2009 5:07pm May 14, 2009 5:07pm
You can easily get a 0.5 or less spread on the EURUSD during liquid hours (Asian/London, London/NY). It's not a myth. Even during early Asian session you can get <1 spread. The only experience I have is with MBTrading, your mileage may vary.
  • #5
  • May 14, 2009 5:18pm May 14, 2009 5:18pm
Quoting ragnakore
This 0.5 pips spread is a myth seen only during those 90% of the times when you are not trading or not going to take any position. And when you do wanna open a position, the spread is usually 1~3 + commission.
I don't know how you come by that assertion, I'm seeing <= 1 pip on most of majors and considerably less than fix fixed broker spreads on the crosses.
This is something I can see in my trading logs, not an impression I have formed. This is also with MB.
The breaking of a wave cannot explain the whole sea.
  • #6
  • May 14, 2009 10:43pm May 14, 2009 10:43pm
For the pairs and way I trade - I prefer to have fixed spreads. With limit prices it is cheaper than commission. 1/2 a pip difference isn't significant enough of a difference to make up for the additional spread volatility and commission costs.

Also this is all perception and marketing nonsense. You can have a bucketshop ECN setup and get bad fills or a solid and fair MM broker trade fairly and get good fills.

Remember odds are way in the favor of the broker. 90% + of the people buying and selling lose without any games being played. To be really successful broker, they only have to book the trades you want and wait for you to lose. It's like Vegas - they do not have to rig the game for most to leave town broke.

I could setup a ECN operation with 100% of the trades going to liquidity providers. Who are the liquidity providers? My uncle Joe is one, aunt Sally another, my brothers Bubba and Snake and so on. Now if they listed who they were and coded them like in NASDAQ so you knew who they were - that would be different.

GO where it works best - try more than one. IMHO.

BR
  • #7
  • May 15, 2009 12:40am May 15, 2009 12:40am
I was wondering if there are brokers offering fixed spread at 2 pips and lower spreads against commission in a single platform, i believe it should be best to choose
Trade the 2p fixed during volatile market and close your trades and take profits at lower spreads, sounds as an option but are there any broker offering 2 in 1?
  • #8
  • May 15, 2009 2:03am May 15, 2009 2:03am
Quoting daveportnoy
To have around 2pip spread or to have around 0.5pip spread and pay some commission. What do you think is better?
Quoting ragnakore
My money on 2 pips fix spread
Quoting Big1red9
With limit prices it is cheaper than commission.
I don't know whether to laugh or cry...
  • #9
  • May 15, 2009 4:14am May 15, 2009 4:14am
Quoting streamline
I was wondering if there are brokers offering fixed spread at 2 pips and lower spreads against commission in a single platform, i believe it should be best to choose
Trade the 2p fixed during volatile market and close your trades and take profits at lower spreads, sounds as an option but are there any broker offering 2 in 1?

Deltastock does this, I think.
  • #10
  • May 15, 2009 7:50am May 15, 2009 7:50am
Not sure why....

If I have a limit buy set at 1.5000 how do I save when paying commission as well?
I had an account with MBT and now run their demo (as well as 4 or 5 other platforms) - If the Math pointed to more profits I would trade their. The benefits have yet to show up.

Passing you a box of kleenex.

quote=Trader KGB;2736245]I don't know whether to laugh or cry...[/quote]
  • #11
  • May 15, 2009 7:57am May 15, 2009 7:57am
Quoting daveportnoy
To have around 2pip spread or to have around 0.5pip spread and pay some commission. What do you think is better?

And for those who know, What do you think about FXCM' ActiveTraders Account?

Thanks
Have you ever think that you can trade without spread and pay commission only on trades in green? Try fxclub. You gonna like it.
  • #12
  • May 15, 2009 1:06pm May 15, 2009 1:06pm
Quoting lavatrader
Have you ever think that you can trade without spread and pay commission only on trades in green? Try fxclub. You gonna like it.
That is, if I you like to pay the 80$ per 100K roundtrip...
  • #13
  • Edited 1:46pm May 15, 2009 1:35pm | Edited 1:46pm
Quoting BlackMage
That is, if I you like to pay the 80$ per 100K roundtrip...
Nope. You pay $40(4 pips) per 100K of any currency traded and you PAY NOTHING if trade brought you loss.
All of them are traded under the same conditions(GBPUSD USDCHF USDJPY AUDUSD NZDUSD USDCAD CADJPY CHFJPY EURCHF EURJPY) and commissions are fixed, so it is better then spreads anyway.

PS : And the best part of it is that you can sell or buy at the same price.
  • #14
  • May 15, 2009 1:38pm May 15, 2009 1:38pm
Quoting Big1red9
Not sure why....

If I have a limit buy set at 1.5000 how do I save when paying commission as well?
I had an account with MBT and now run their demo (as well as 4 or 5 other platforms) - If the Math pointed to more profits I would trade their. The benefits have yet to show up.

Passing you a box of kleenex.

quote=Trader KGB;2736245]I don't know whether to laugh or cry...
[/quote]

This is obvious I should think.

Let's say your broker has no commission and a 2 pip fixed spread. Let's then say you buy at 1.5000, then instantly sell for example. So you sell at 1.4998, a loss of 2 pips.

Now say you do the same with a commission broker that has a very tight spread, say 0.5 pips, and they also charge 0.5 pips commission per trade (so 1.0 pips round turn, buy + sell). You buy at 1.5000, sell at 1.4999.5 (a 0.5 pip loss); add the 1.0 pip commission and you're at a loss of 1.5 pips vs 2 pips with the fixed spread broker.

Of course EU has very tight spreads, so this can calculate out differently with different pairs, but that's the basic math...

Hope that helps
  • #15
  • May 16, 2009 10:50am May 16, 2009 10:50am
As I said... for my methods fixed is better. If I buy at 1.5000 I am selling at 1.5010 or 1.5020 depending on certain tools I use. So again for me... it is better working with fixed spreads. I do realize that for most using gut emotions flopping in and out that average of 2 pips trade that may not be the case. While every week is different, what I trade and how I had 32 round trips with an average profit of 17.4 pips. Each were limit orders determined in advance of a market move.
IF I paid commission it would have taken away from my bottom line period. That is not to say that spreads don't matter. If they were to wide - it is possible that I would not have a given trade take place. If that missed opportunity happened once last week that would have added a cost of about 1/4 of a pip R/T. While it did not happen - if I missed 4 last week - paying commission would be break-even and so on.

Everyone has to do there own workup for the way they trade and run the numbers or trade one broker one fixed - same trades and run out a P/L total. I run my trades with more than one broker for a number of reasons. One minor one is that I can compare fill rates (number of orders entered vs number filled).

There are many ways to trade the markets. Use the tools you think work best - then verify the results.




This is obvious I should think.

Let's say your broker has no commission and a 2 pip fixed spread. Let's then say you buy at 1.5000, then instantly sell for example. So you sell at 1.4998, a loss of 2 pips.

Now say you do the same with a commission broker that has a very tight spread, say 0.5 pips, and they also charge 0.5 pips commission per trade (so 1.0 pips round turn, buy + sell). You buy at 1.5000, sell at 1.4999.5 (a 0.5 pip loss); add the 1.0 pip commission and you're at a loss of 1.5 pips vs 2 pips with the fixed spread broker.

Of course EU has very tight spreads, so this can calculate out differently with different pairs, but that's the basic math...

Hope that helps [/quote]
  • #16
  • May 16, 2009 12:29pm May 16, 2009 12:29pm
Quoting Big1red9
Now say you do the same with a commission broker that has a very tight spread, say 0.5 pips, and they also charge 0.5 pips commission per trade (so 1.0 pips round turn, buy + sell).
Whenever these comparisons come up, it seems the default ECN rate used is MBT's rate, which is the highest in the industry (two and a half times higher than IB's rate). Using IB's rate of 0.2 pip and the story is quite different (0.5 spread + 0.4 commish = 0.9). That 1.1 pip difference over a 2-pip fixed spread will add up very quickly, especially if you grow your trade size over time to $100/pip, $500/pip, etc.
  • #17
  • May 16, 2009 1:49pm May 16, 2009 1:49pm
Quoting Trader KGB
Whenever these comparisons come up, it seems the default ECN rate used is MBT's rate, which is the highest in the industry (two and a half times higher than IB's rate). Using IB's rate of 0.2 pip and the story is quite different (0.5 spread + 0.4 commish = 0.9). That 1.1 pip difference over a 2-pip fixed spread will add up very quickly, especially if you grow your trade size over time to $100/pip, $500/pip, etc.
Agree, and that's without taking into account what these 2-pip-fixed-spread shops do to quotes! By the time price gets to the trader's platform he's probably paying >5 pips above an ECN (probably more), and heaven knows what kind of spread around fundamental data releases (news).

It's an expensive way to trade but I guess the attraction is flexibility and minimum trade size, I imagine it's the only way they get any business.
  • #18
  • May 16, 2009 3:57pm May 16, 2009 3:57pm
Quoting Big1red9
As I said... for my methods fixed is better. If I buy at 1.5000 I am selling at 1.5010 or 1.5020 depending on certain tools I use. So again for me... it is better working with fixed spreads. I do realize that for most using gut emotions flopping in and out that average of 2 pips trade that may not be the case. While every week is different, what I trade and how I had 32 round trips with an average profit of 17.4 pips. Each were limit orders determined in advance of a market move.
IF I paid commission it would have taken...
Was just attempting to answer the question that you asked, which was:

"Not sure why....

If I have a limit buy set at 1.5000 how do I save when paying commission as well?"
  • #19
  • May 17, 2009 6:23am May 17, 2009 6:23am
I think you all missed my point because I care less about how much I'm paying to the broker.

It's important to me to get in a trade or out a trade with profit.
sometimes just because 1 or 2pips my limit for profit in not executing and the trade is closing break even because the market is never coming back to that area. Its so annoying.

btw: i dont sculp
  • #20
  • May 17, 2009 6:41am May 17, 2009 6:41am
Quoting daveportnoy
I think you all missed my point because I care less about how much I'm paying to the broker.

It's important to me to get in a trade or out a trade with profit.
sometimes just because 1 or 2pips my limit for profit in not executing and the trade is closing break even because the market is never coming back to that area. Its so annoying.

btw: i dont sculp
And you think wider spreads and bucketshop quote manipulation has nothing to do with that?

You should care how much you're paying your broker, it's all coming out of your profit (or increasing your loss)!
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