When does trade size affect pricing? | Forex Factory

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When does trade size affect pricing?

  • #1
  • First Post: Apr 24, 2007 9:59pm Apr 24, 2007 9:59pm
I haven't asked a dumb question in a while, so here goes:

How big can one single trade be before it affects the market for a particular pair?

Example - If the ask on the EURUSD is 1.3632, as it is right now, how many standard lots could one order be before it changed the price?

I'm sure the answer will depend on the time of day and the currency pair in question, etc, but in general, what's the right way to figure this out?

I'm used to thinking about this on the stock market when trading penny stocks or deep ITM or OTM options but even though forex is so huge in comparison, there has to be some breaking point.

If Joe Smoe Trader has a $10m account and decides to buy 1000 standard lots of EURUSD at market price, would anyone notice or even care? Or is this big enough to affect the market price?

Of course, hopefully someday I will be Joe Smoe Trader and need to know this...
  • #2
  • Apr 25, 2007 7:08am Apr 25, 2007 7:08am
Quoting TrunkMusic6
I haven't asked a dumb question in a while, so here goes:

How big can one single trade be before it affects the market for a particular pair?

Example - If the ask on the EURUSD is 1.3632, as it is right now, how many standard lots could one order be before it changed the price?

I'm sure the answer will depend on the time of day and the currency pair in question, etc, but in general, what's the right way to figure this out?

I'm used to thinking about this on the stock market when trading penny stocks or deep ITM or OTM options but even though forex is so huge in comparison, there has to be some breaking point.

If Joe Smoe Trader has a $10m account and decides to buy 1000 standard lots of EURUSD at market price, would anyone notice or even care? Or is this big enough to affect the market price?

Of course, hopefully someday I will be Joe Smoe Trader and need to know this...
Liquidity is the key here. In the EurUSd, 1000 standard lots can move the markets 1 or 2 pips during London or NY time. During Asian time you can move a little more. 1000 standard lots in less liquid pairs you can move the price a few more pips than the EuroUsd pair.

Remember when you going to trade such sizes somebody (counterparties) must take the other side of the trade in the form of entry oders, TP orders or SL orders. $10m with 1:50 or 1:100 leverage isnt that easy to trade without knowing the trading mechanics and participants of spot forex. Thats why is funny to hear traders saying "Im gonna grow my 10k account to 1zillion account".

In a EFX webinar I heard the story of a news trader who made 2mill from a 100k account. After reaching that level he lose it all.
Guess what was the main reason he lose the money after 20x his account.

Fact: Spot Forex isnt a 1.8trillion size market. Just check this:
http://en.wikipedia.org/wiki/Forex#M..._and_liquidity
  • #3
  • Last Post: Apr 25, 2007 7:18am Apr 25, 2007 7:18am
Quoting TrunkMusic6
I haven't asked a dumb question in a while, so here goes:

How big can one single trade be before it affects the market for a particular pair?

Example - If the ask on the EURUSD is 1.3632, as it is right now, how many standard lots could one order be before it changed the price?

I'm sure the answer will depend on the time of day and the currency pair in question, etc, but in general, what's the right way to figure this out?

I'm used to thinking about this on the stock market when trading penny stocks or deep ITM or OTM options but even though forex is so huge in comparison, there has to be some breaking point.

If Joe Smoe Trader has a $10m account and decides to buy 1000 standard lots of EURUSD at market price, would anyone notice or even care? Or is this big enough to affect the market price?

Of course, hopefully someday I will be Joe Smoe Trader and need to know this...
This question was asked last week. Use the search feature on the left side of the frame.

Good Luck
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