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Spread Vs. Commission

  • #21
  • May 18, 2009 6:56am May 18, 2009 6:56am
Quoting pipmutt
quote manipulation has nothing to do with that?
I'm sure it's because quote manipulation. That's what I meant.

So i say that i rather have huge commission to pay with very tighter spread because the most important thing is that i'm out of the trade with profit.

so even if i'll pay for 100K trade, let's say 30$ commission with 0.5spread. I prefer that over 2pip "fix" spread with quote manipulation.

What do you think?
  • #22
  • May 18, 2009 7:00am May 18, 2009 7:00am
Getting back on track here - The deciding factor is the amount of trades you do, i.e. if you are doing 20 / 30 trades a day then commission is not the way forward.

If you go for a fixed spread, I'd advise you to pick one which :
A) doesn't bet against you
B) is not known for slippage

as those to factors will really effect your trading performance! In my way you will have enough things to worry about and should not be spending time trying to get out of a trade. A broker should be easy to use and do what it says on the tin

Cheers WG
  • #23
  • May 18, 2009 7:48am May 18, 2009 7:48am
Quoting welshguy2000
The deciding factor is the amount of trades you do, i.e. if you are doing 20 / 30 trades a day then commission is not the way forward.
I don't follow your logic. If a 2-pip fixed spread works out more expensive than a .5 pip spread + commission then how does the number of trades make any difference? In fact the more volume you trade the cheaper an ECN's commission gets whereas fixed spread shops never narrow spreads for you if you trade more.

All fixed spread brokers trade against their clients, they're bucketshops, their spreads and quotes are artificial and only loosely based on the underlying market.
  • #24
  • May 18, 2009 11:31am May 18, 2009 11:31am
Quoting daveportnoy
I'm sure it's because quote manipulation. That's what I meant.

So i say that i rather have huge commission to pay with very tighter spread because the most important thing is that i'm out of the trade with profit.

so even if i'll pay for 100K trade, let's say 30$ commission with 0.5spread. I prefer that over 2pip "fix" spread with quote manipulation.

What do you think?
I didn't mean 'quote manipulation' as in they're purposely moving/freezing quotes to miss your target (although theoretically it's possible it would be impractical to quote individually), I meant they're manipulating quotes to suit their book and also shade their liquidity providers quotes so they can make money.

I follow what you mean though, it's better to pay commission and have an unadulterated price feed and get out of a trade rather than miss an exit because spread was wider or quotes manipulated.

If you've got the capital and are able to trade the required minimums then ECN is the way to go in my opinion, they're not looking at why you want to buy or sell (ie stop loss or take profit), they're just filling your orders at the best price, that's their job and what you pay them for.

Having said that, a lot depends on your trading style. There are times when a fixed-spread (or variable spread come to that) bucketshop who fills your trades instantly automatically is better than getting no fill or a partial fill on an ECN, it's horses for courses!
  • #25
  • May 18, 2009 4:00pm May 18, 2009 4:00pm
Quoting welshguy2000
Getting back on track here - The deciding factor is the amount of trades you do, i.e. if you are doing 20 / 30 trades a day then commission is not the way forward.
Wow.. I would like to know your logic behind this too (mainly for amusement).
  • #26
  • May 19, 2009 2:27am May 19, 2009 2:27am
Fellas, you are constantly talking about ECNs, how many of you really do know what they are in fact? When your limit gets hit whose order does fill yours?? Do you see e.g. that you bougt from a particular bank or sold to another... I am getting confused about the way rookies get misleaded... Look at the FXCM' ActiveTraders account... any ideas who is the liquidity provider, is barc, rbs, citi, bac or any other interbank participant. They do generate liquidity in Millions just in 1 pip, if you realy sweep that ammount the market price should move, does it happen??? They are perfect example for an "ECN" None of your orders get out of the ecn usually...

Let me underline that i am not saying that there are not real ECNs..
  • #27
  • May 19, 2009 2:37am May 19, 2009 2:37am
Quoting streamline
Do you see e.g. that you bougt from a particular bank or sold to another...
Yes, IB shows you the counterparty bank to each trade.

Quote
I am getting confused about the way rookies get misleaded... Look at the FXCM' ActiveTraders account... any ideas who is the liquidity provider, is barc, rbs, citi, bac or any other interbank participant. They do generate liquidity in Millions just in 1 pip, if you realy sweep that ammount the market price should move, does it happen??? They are perfect example for an "ECN" None of your orders get out of the ecn usually...
FXCM ActiveTrader isn't an ECN in all manners of the definition. First and foremost, they don't clear client-to-client orders. Secondly, they spread liquidity down the book (i.e. the top shows a fairly static 1M, thus if you're trading in larger amounts, you're slipped further down the book).
  • #28
  • May 19, 2009 4:21am May 19, 2009 4:21am
IB used to show but not anymore, check out your statements once again to check it out who is the counterparty does not matter whether you deal at ideal or ideal pro, it only says IBFX, no more clearing )
I gave FXCM as an exact example how do usually the guys who claim to be ECN operate, i am not saying they are one.
  • #29
  • May 19, 2009 8:35am May 19, 2009 8:35am
Quoting streamline
Fellas, you are constantly talking about ECNs, how many of you really do know what they are in fact? When your limit gets hit whose order does fill yours?? Do you see e.g. that you bougt from a particular bank or sold to another... I am getting confused about the way rookies get misleaded... Look at the FXCM' ActiveTraders account... any ideas who is the liquidity provider, is barc, rbs, citi, bac or any other interbank participant. They do generate liquidity in Millions just in 1 pip, if you realy sweep that ammount the market price should move,...
There's a clear distinction between ECN's (or ECN-style) who STP trades even though they might be the intermediate counterparty, and bucketshops who have a vested interest in seeing clients lose and where a conflict of interest exists. You've also got to consider how each respective model generate their revenue, either through commissions or through padding spreads and shading price. It's fairly obvious which model offers a more level playing field for the trader.

At this level of investment I think there are only a few true ECN's who act purely as agent, Hotspot FXi is one I believe.

The original poster was concerned and frustrated that his orders were frequently being missed. Obviously there could be a couple of reasons for that and perhaps it's just down to poor analysis, but taking the bucketshop broker out of the equation seems like a good idea regardless
  • #30
  • May 19, 2009 10:57am May 19, 2009 10:57am
If you are not trading significant volumes i do reccommend a proven marketmaker for a broker, GFT, CMC, FXCM and many others. Please keep in mind that if your monthly round turn is not more than 100k you cannot use any real ECN, only ECN style brokers
  • #31
  • May 19, 2009 12:27pm May 19, 2009 12:27pm
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

It's actually better than that because on a true ECN, your limits will often get filled while you ARE the bid or ask. You save 2 pips completely and you aren't paying that in commission. The original poster's comment was uninformed. If you are trading with a lot of Limit orders, you are vastly better off on an ECN system with commissions. Not even a close comparison.
  • #32
  • May 19, 2009 12:29pm May 19, 2009 12:29pm
Quoting Trader KGB
Wow.. I would like to know your logic behind this too (mainly for amusement).
Me too
  • #33
  • May 19, 2009 12:29pm May 19, 2009 12:29pm
Quoting streamline
If you are not trading significant volumes i do reccommend a proven marketmaker for a broker, GFT, CMC, FXCM and many others. Please keep in mind that if your monthly round turn is not more than 100k you cannot use any real ECN, only ECN style brokers
True and absolutely correct things you posting bro. A lot of guys here feel themself happy when their dealer tell lies that their 10K or 50K orders goes to some very very very big and known well bank :LOL But they accept this lie and posting everywhere that the dealer is "TRUE ECN BROKER" :LOL again
  • #34
  • May 19, 2009 12:31pm May 19, 2009 12:31pm
Quoting streamline
If you are not trading significant volumes i do reccommend a proven marketmaker for a broker, GFT, CMC, FXCM and many others. Please keep in mind that if your monthly round turn is not more than 100k you cannot use any real ECN, only ECN style brokers
What in the world does that mean? What broker monitors "monthly round turn" under $100k?
  • #35
  • May 19, 2009 12:32pm May 19, 2009 12:32pm
Quoting trederKGB
True and absolutely correct things you posting bro. A lot of guys here feel themself happy when their dealer tell lies that their 10K or 50K orders goes to some very very very big and known well bank :LOL But they accept this lie and posting everywhere that the dealer is "TRUE ECN BROKER" :LOL again
That's nonsense. I notice that you had to try to mimic the username of someone who really posts on these boards...is your plan to confuse people into thinking you are him?
  • #36
  • May 19, 2009 12:35pm May 19, 2009 12:35pm
Quoting streamline
if your monthly round turn is not more than 100k you cannot use any real ECN, only ECN style brokers
You're using 'k' as an abbreviation for millions not thousands, right?
  • #37
  • May 19, 2009 2:13pm May 19, 2009 2:13pm
Quoting pipmutt
You're using 'k' as an abbreviation for millions not thousands, right?

Does it really matter, most of the people here want to learn how does the market work, just trying to explain my point of view
  • #38
  • May 19, 2009 2:20pm May 19, 2009 2:20pm
Quoting streamline
Does it really matter, most of the people here want to learn how does the market work, just trying to explain my point of view
It does matter because I've never heard of a broker that penalizes you for not trading 100k.
  • #39
  • May 19, 2009 3:43pm May 19, 2009 3:43pm
Quoting streamline
Does it really matter, most of the people here want to learn how does the market work, just trying to explain my point of view
You said "....if your monthly round turn is not more than 100k you cannot use any real ECN....". I simply asked if you were using 'k' as an abbreviation for million as opposed to thousand as I very much doubt there are any ECN's who stipulate minimum volume of 100,000 per month! Your reply....does it really matter!!! lol, well yes of course it matters! Sheeesh....

It's ok don't you worry about it
  • #40
  • May 19, 2009 5:39pm May 19, 2009 5:39pm
Quoting trederKGB
True and absolutely correct things you posting bro. A lot of guys here feel themself happy when their dealer tell lies that their 10K or 50K orders goes to some very very very big and known well bank :LOL But they accept this lie and posting everywhere that the dealer is "TRUE ECN BROKER" :LOL again
Talking out of your arse much? At IB you see which banks fill your order (UBS, ABN, DB - the usual suspects, a list of participating banks can be found on their website). And there is client-to-client trading too. Orders any amount > 25K units. So there.
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