ECNs vs. Slippage | Forex Factory

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ECNs vs. Slippage

  • #1
  • First Post: Mar 23, 2010 10:37pm Mar 23, 2010 10:37pm
Experienced ECN traders needed to post here.
Let's go.
ECN and real STP brokers like MBTrading, Thecollectivefx, FXCBS, Jadefx has little slippages on 95% of the orders we make. Even when the price has not changed a little slippage of 0.2 to 0.5 pips is there. For some unliquidity pair like audnzd we have 1 pip slippage or more. Why?
NOTE: LATENCY is not a problem here. I use a very powerfull internet connection and computer.

1 - I know it's market execution.
2 - I know the price may change fast.
3 - I know latency is a very important metter.
Those 3 point are NOT my question.
I wanna know from a professional ECN trader why those little slippages are always happening even if you have the best techonology in your favor.
Thanks
  • #2
  • Mar 24, 2010 7:29am Mar 24, 2010 7:29am
One possibility: Adverse selection. You generally have a higher probability of getting filled at a worse price than at a better price.

All FX "ECN's" operates differently so it migth be down to specific implementation...which leads to another possibility: You don't know if the so-called ECN's you mention are screwing you.

I don't now what you definition of "powerfull internet connection" is, but unless your coloed (ping time ~0) latency will always be an issue.
  • #3
  • Mar 24, 2010 8:09am Mar 24, 2010 8:09am
[quote=I wanna know from a professional ECN trader why those little slippages are always happening even if you have the best techonology in your favor.
Thanks[/QUOTE]

The thing is that MT4 was never designed to for ECN connection. Like one technical guys explained to me you can compare it by if you would like to but an elephant into a fridge. Now you have two options whether you find a fridge that fits to the elephant or make the elephant to fit the fridge. With MT4 and ECN they did the last option so that is the reason one can have slippage and all other weird things you should not have trading with ECN.

Regards

Kristjan
  • #4
  • Mar 24, 2010 9:34am Mar 24, 2010 9:34am
Slippage always follow low spreads and commissions. Simply cause there is no free lunch.

You can find brokers such are FXCM, FOREX.COM, FXCLUB who does guarateed fills on stops and limits.
  • #5
  • Mar 24, 2010 9:44am Mar 24, 2010 9:44am
Quoting Mr. Madruga
Experienced ECN traders needed to post here.
Let's go.
ECN and real STP brokers like MBTrading, Thecollectivefx, FXCBS, Jadefx has little slippages on 95% of the orders we make. Even when the price has not changed a little slippage of 0.2 to 0.5 pips is there. For some unliquidity pair like audnzd we have 1 pip slippage or more. Why?
NOTE: LATENCY is not a problem here. I use a very powerfull internet connection and computer.

1 - I know it's market execution.
2 - I know the price may change fast.
3 - I know latency is a very important metter....
There really are only 2 possibilities:

1) The detrimental slippage situation is your imagination, meaning you get slipped in your favor as much as you get slipped to your detriment, but consciously only notice the bad fills rather than the good (human nature I think).

2) It's not your imagination and your broker has some technology programmed into the platform (MT4 or otherwise) to slip you by micro amounts to your detriment every trade.

I don't put #2 past brokers quite honestly. If every trade gets slipped 0.2 pips, and you multiply that by millions of trades a year, it sure would add up. This assumes of course that your broker would benefit from this slippage, but if there's a way of them keeping that 0.2-0.5 pips every trade, again I wouldn't put it past them.

Don't know if that helps any, but my thoughts since you asked...
  • #6
  • Mar 24, 2010 12:06pm Mar 24, 2010 12:06pm
Thank you all for participating.

How about the bank/liquidity provider side?
I was reading this article today, about this same subject. Very nice.
http://www.jadeinvestments.com/forum...hread.php?t=75
  • #7
  • Mar 24, 2010 11:05pm Mar 24, 2010 11:05pm
Quoting Mr. Madruga
Thank you all for participating.

How about the bank/liquidity provider side?
I was reading this article today, about this same subject. Very nice.
http://www.jadeinvestments.com/forum...hread.php?t=75
"We also checked , double checked and triple checked and made sure that every thing from our Liquidity Provider to JadeFX is optimized and configured correctly for complete Pure STP."

Given that's the primary function of their business, they shouldn't have to "double check" that it's working, it should always be working. That's the equivalent of Google saying they double checked to make sure their search engine was working..

Also, "Liquidity Provider" was another giant red flag, due to its singularity. Given that omission, I would strongly advise against trading with JadeFX, and instead suggest trading with firms that utilize multiple liquidity providers. Perhaps that would clear up your slippage situation as well.
  • #8
  • Mar 24, 2010 11:20pm Mar 24, 2010 11:20pm
Quoting Trader KGB
"We also checked , double checked and triple checked and made sure that...
YOU-->>Broker-->>(Opt. Central Exchange. FXCM)-->>Banks. - There are plenty of routes that could use optimization if someone throws up a red flag that all is not working perfectly. A LOT can happen at the broker just with the server/connectivity config. I give em the benefit of the doubt on this point only. (if service improves. double-checking should always improve things a bit)
  • #9
  • Mar 24, 2010 11:22pm Mar 24, 2010 11:22pm
Latency is the problem.

Its just not your latency.

Its the following:

Connections from

You -> Broker
Broker -> Aggregator via bridge
Aggregator -> Liquidity providers

Its the actual process that creates the slippage, Id consider myself lucky that its only 1 pip or 0.5 pips.

Orders on an order book are processed in an order on execution basis.. That is, if there is 1000 lots pending, the first person to execute gets priority unless given a higher end status.

If the volume is not available to execute your trade, you are given the next available price. Unfortunately, MT4 ECN does not have a "fill or kill" option. That is, it will always fill at the first available price, and deviation cannot be stopped.

It is recommended that people not use ECN platforms unless fully informed and experienced with such execution and markets. After all the ECN market is different to the retail market. Trading conditions are different and it could be the difference between winning and losing.

If this is becoming a problem for you, you might want to look at moving back to a market maker.

Hope this helps.
  • #10
  • Mar 24, 2010 11:28pm Mar 24, 2010 11:28pm
Quoting Aja
YOU-->>Broker-->>(Opt. Central Exchange. FXCM)-->>Banks. - There are plenty of routes that could use optimization if someone throws up a red flag that all is not working perfectly. A LOT can happen at the broker just with the server/connectivity config. I give em the benefit of the doubt on this point only. (if service improves. double-checking should always improve things a bit)
To be honest, it was more in the way it was phrased, not exactly the language of an esteemed FX institution. It doesn't help matters that a cursory review of JadeFX's website immediately raises about a dozen red flags. This has bucketshop written all over it.
  • #11
  • Mar 24, 2010 11:47pm Mar 24, 2010 11:47pm
Quoting Takisd
If this is becoming a problem for you, you might want to look at moving back to a market maker.
Or better yet, consider trading on an ECN directly and skipping the whole 'bridge > aggregator > LPs' MT4 pitfall.
  • #12
  • Mar 25, 2010 12:12am Mar 25, 2010 12:12am
Quoting Trader KGB
Or better yet, consider trading on an ECN directly and skipping the whole 'bridge > aggregator > LPs' MT4 pitfall.
I'd like to know of an mt4 ECN not using a bridge. So I can plaster their dirty name all over the internet as liars.

If you want a pure ECN, be prepared to cough up the big bucks. Most are aggregated in some way.
  • #13
  • Mar 25, 2010 12:25am Mar 25, 2010 12:25am
Quoting Takisd
I'd like to know of an mt4 ECN not using a bridge. So I can plaster their dirty name all over the internet as liars.
I never saw the allure of manual trading within MT4 anyway, so plaster away!

Quote
If you want a pure ECN, be prepared to cough up the big bucks.
$500 for MBT and I'd say they're "pure" enough for most.
  • #14
  • Mar 25, 2010 7:45am Mar 25, 2010 7:45am
Quoting Trader KGB
Or better yet, consider trading on an ECN directly and skipping the whole 'bridge > aggregator > LPs' MT4 pitfall.
Many FX ECN's (especially the "retail" ECN's) is based on the basic architecture:

Trader
______->ECN
___________->Local market place
___________->External liquidity provider(s)

If your order is matched with internal liquidity the latencies can be assumed to be small (few milliseconds). However, if your order is routed to an external liquidity provider, it has to be sent to that entity, accepted and acknowledged back. This can result in considerable latencies.

Add to this that we haven't even stated on discussing bank's last look possibility...

NOTE: This is all AFAIK. It's hard to gain full insight into this given the opacity of OTC FX.
  • #15
  • Mar 25, 2010 3:41pm Mar 25, 2010 3:41pm
As others have pointed out, there can be a lot of things on the broker's side (such as location of liquidity provider(s)) that can add to latency, and you may never get to know exactly what.

All we can do is test brokers, recording slippage of every trade open and close. I use code like this to get the duration of order execution:

Inserted Code
   int orderStartPointInTime = GetTickCount();
   int ticket = OrderSend(symbol, orderType, tradeSizeInLots, openPrice, OpenSlipAllowedInPts, stopLossPrice, 0, OrderComment1, magicNumber, 0);
   double orderExecutionDurationInMs = GetTickCount() - orderStartPointInTime;
  • #16
  • Apr 24, 2010 11:45am Apr 24, 2010 11:45am
Quoting Trader KGB
To be honest, it was more in the way it was phrased, not exactly the language of an esteemed FX institution. It doesn't help matters that a cursory review of JadeFX's website immediately raises about a dozen red flags. This has bucketshop written all over it.
I traded a retail broker's MT4 platform (FXCM) for a while last year and up to March or so this year, and it was not a positive experience. I've been with JadeFX since Jan '10 and it's been good overall. I've done over 5000 pips on JadeFX since their new liquidity early March and have not had any problems.

To me, "bucketshop" connotes an outfit that takes positions against their clients to the broker's advantage. In my experience JadeFX is not doing that at all. If they were, they would not want us to bring in more business as we are up over 20% on our main accounts since March and a bucketshop would be on the losing side of our trades, would they not?

Could you elaborate on the red flags and what exactly you mean by "bucketshop"? If it's just a matter of "the language of an esteemed FX institution" missing then so be it, you can have your Goldman-Sachs-type esteemed institutions.
  • #17
  • Apr 24, 2010 4:46pm Apr 24, 2010 4:46pm
Quoting Mr. Madruga
Experienced ECN traders needed to post here.
Let's go.
ECN and real STP brokers like MBTrading, Thecollectivefx, FXCBS, Jadefx has little slippages on 95% of the orders we make. Even when the price has not changed a little slippage of 0.2 to 0.5 pips is there. For some unliquidity pair like audnzd we have 1 pip slippage or more. Why?
NOTE: LATENCY is not a problem here. I use a very powerfull internet connection and computer.

1 - I know it's market execution.
2 - I know the price may change fast.
3 - I know latency is a very important metter.
Those...
Any streaming prices quoted on any multibank venue are of indicative nature only, meaning:

If you place a MARKET order at any given time by hitting the bid or lifting the offer your order will join a queue of orders and your order will be aggregated with other ones at the same price level, the question is however: is there someone on the other side of yours willing to accept your bid/offer at the stated price, if not, obviously your order will get filled at a level where there is a counterparty willing to accept a deal.

The only thing you can do in order to avoid ANY slippage is to work with Limit orders or IOC orders, though this way you might not get a fill or a partial fill only.

Best.
  • #18
  • Apr 24, 2010 5:36pm Apr 24, 2010 5:36pm
Quoting tbuitendyk
Could you elaborate on the red flags and what exactly you mean by "bucketshop"?
Well the biggest red flag is that of their being unregulated and domiciled out of Belize. In this day and age of massive fraud, there is virtually no reason to trust your hard earned capital with a broker that is unregulated. Given the plethora of options that are either FSA, NFA/CFTC, or FINRA regulated, why bother going with an unregulated shop? What is JadeFX offering that the rest of the regulated competition isn't beating them at? It's simply an ill-advised choice to do business with an unregulated entity. These guys could run off in the middle of the night with your deposit and you have zero recourse (the same can be said for any unregulated shop, especially those operating out of terrorities known for their business secrecy & limited legal avenues - Belize, Cyprus, Russia, BVI, UAE, etc).

Secondly, they make no mention of who their liquidity providers are, nor who their executives/owners are. Why the secrecy?

Thirdly, and this applies to a lot of these bucketshops, their bank funding options should be clearly listed. Sometimes these bucketshops don't even offer a bank funding option (FXCBS) which is biggest scam sign imaginable. JadeFX does, although they don't mention the bank, instead they have to "email you the details", upon which, there is a $14 "processing fee" for deposits. That's completely absurd, and reeks of a juvenile outfit that is simply not credible.

(The rampant grammatical errors and just plain crudity of their website certainly isn't helping dispel any notions of their lack of credibility.)

"Bucketshop" is traditionally a term used to describe a broker which doesn't hedge customer orders with the interbank market, instead it "buckets" all trades internally and profits against client losses. I take it one step further and simply apply it as a derogatory term to describe any shadey outfits like the broker in question.
  • #19
  • Apr 25, 2010 5:53am Apr 25, 2010 5:53am
Quoting Hyper
As others have pointed out, there can be a lot of things on the broker's side (such as location of liquidity provider(s)) that can add to latency, and you may never get to know exactly what.

All we can do is test brokers, recording slippage of every trade open and close. I use code like this to get the duration of order execution:

[code]...

With which platform does this code work ?
  • #20
  • Edited 8:27am Apr 25, 2010 8:14am | Edited 8:27am
Quoting Mr. Madruga
Experienced ECN traders needed to post here.
Let's go.
ECN and real STP brokers like MBTrading, Thecollectivefx, FXCBS, Jadefx has little slippages on 95% of the orders we make. Even when the price has not changed a little slippage of 0.2 to 0.5 pips is there. For some unliquidity pair like audnzd we have 1 pip slippage or more. Why?
NOTE: LATENCY is not a problem here. I use a very powerfull internet connection and computer.
If Jade dose this then i would be a little worried and change brokers. I thought when i looked at them that the $5 a side had to have a hidden cost.

Quote
1 - I know it's market execution.
2 - I know the price may change fast.
3 - I know latency is a very important metter.
Those 3 point are NOT my question.
I wanna know from a professional ECN trader why those little slippages are always happening even if you have the best techonology in your favor.
Thanks
use limit orders = no slippage, another reason I trade with Interactive Brokers as all orders are set up as limit unless changed in your presets.

Trader KGB I belive jade a re white lable for FXCM like ATC as their quotes are exactly the same as ATC.
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