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avoiding paying the spread

  • #21
  • Oct 15, 2010 10:42pm Oct 15, 2010 10:42pm
Quoting pippin4me
Well my new broker seems to have two orders for sell/buy stops, one at the bid and one at the ask, also the stop loss order can also be at bid or ask.
I think you must be missing something here. If a broker offers an "inverse spread" such as you describe, then there is nothing to stop you from opening and closing a trade immediately with a profit. I don't think I need to explain why this wouldn't be sustainable for more than about 5 milliseconds. Let's just put it this way: What if you walked into a 7/11 and saw them selling your favorite magazine at $5 or at $10 (it's up to you which price you want to pay). How many people do you think would pay $10?

According to what you are saying, if bid/ask is 1.5000/1.5005 and you can buy at 1.5000 and immediately sell at 1.5005, you can clear 5 pips without any movement in the market. This can't be the case unless your broker either likes giving away money, or they are a scam.

What I believe is confusing you is that some brokers may offer the ability to execute buy orders when the bid price hits a pre-determined level, regardless of what the ask price is. Rest assured though that the ask price is what you will get filled at, it's just that you don't have to specify it. So for example you can enter a "buy when bid price reaches 1.5000" order which will be 1.5005 if the spread at that point is 5 pips, but you will get filled at 1.5007 if the spread is 7 pips. The opposite would be true for sell orders of course.

I don't really see the benefit in this, but it certainly makes more sense than what you are saying.
  • #22
  • Edited 11:36pm Oct 15, 2010 11:25pm | Edited 11:36pm
Quoting fierceman
If a broker offers an "inverse spread" such as you describe, then there is nothing to stop you from opening and closing a trade immediately with a profit...
This is exactly what I think he's saying he can do. When ATC Brokers was with Hotspot FX you could do this. Since it was true ECN with ability to see the counterparty too. You could place orders wherever you wanted inside the spread and if a counterpary took the deal you were good. If not the order just wouldnt be filled. I used the tactic all the time with EURUSD to enter the trade with ZERO spread (I'd BUY at the Bid price instead of the Ask). I would think the only possible might be MB Trading or Oanda but I cant confirm it. You need TRUE ECN ability to pull of this trick.

Also Pippin you only need to BUY at the Bid/ SELL at the Ask - You dont have to worry about closing the order. Spread is paid when you open the order. You can simply close it normally. Trying to open orders like this will reduce your trading activity since there will be a fair number of rejected orders but its a kool trick to avoid trades going negative (spread fee) when they're opened.
  • #23
  • Oct 16, 2010 2:50am Oct 16, 2010 2:50am
Sorry for the confusion guys, I probably didn't explain it well enough.

Quoting Aja
This is exactly what I think he's saying he can do. You could place orders wherever you wanted inside the spread and if a counterpary took the deal you were good.
Yes, that's it.

I know that there is a technique to buy at bid and sell at ask in a matter of milliseconds to get get profit, but that is not what I want to do. I'm just trying to find a more efficient way to enter a trade. But it sounds like a lot of the time I won't get filled doing this.

Anyway I put a live one in last night, videoed it and SEEMS like there wasn't any spread and was just charge commission, need more checking and I'll post something up later
  • #24
  • Oct 16, 2010 4:34pm Oct 16, 2010 4:34pm
Quoting fierceman
I think you must be missing something here. If a broker offers an "inverse spread" such as you describe, then there is nothing to stop you from opening and closing a trade immediately with a profit.
About a year ago, during some news announcement my ECN broker had EURUSD crossed for what seemed at least 30 seconds. I kept hitting Buy-Sell, Buy-Sell and made about 150 pips. In retrospect I wish I had used my 100:1 leverage on that...

If there's a strong reaction to news, an ECN broker will have a crossed-market for more than 5 milliseconds, but usually for only a second or two, once or twice, until things get figured out.
  • #25
  • Oct 18, 2010 11:18pm Oct 18, 2010 11:18pm
Quoting Rob Mondave
If there's a strong reaction to news, an ECN broker will have a crossed-market for more than 5 milliseconds, but usually for only a second or two, once or twice, until things get figured out.
I must say I have not seen that, but there is a great market inefficiency to exploit using an API, assuming you can consistently get filled at those prices.
  • #26
  • Oct 18, 2010 11:51pm Oct 18, 2010 11:51pm
Sounds like you guys really need to go look up what bucket shop brokerages are and retail market maker brokerages. I use MB Trading because of their ECN (Electronic Communications Network) executions. They charge a flat rate fee per amount of currency traded (a set amount per dollar of your account's currency such as USD). Like it was said earlier, they give you the real market spreads and don't add their commission into it. Because the commission is always proportional, it will always be a certain amount of pips for the pair. I believe MB is .245 pips per buy/sell so .49 pips per in and out, which is FAR below the 4 pip in and out commission of the bucket shops!
  • #27
  • Last Post: Oct 19, 2010 6:58am Oct 19, 2010 6:58am
Quoting DKallDAY
Sounds like you guys really need to go look up what bucket shop brokerages are and retail market maker brokerages. I use MB Trading because of their ECN (Electronic Communications Network) executions. They charge a flat rate fee per amount of currency traded (a set amount per dollar of your account's currency such as USD). Like it was said earlier, they give you the real market spreads and don't add their commission into it. Because the commission is always proportional, it will always be a certain amount of pips for the pair. I believe MB is .245...
I was looking at them. Is that .49 per side of the trade? .49 when you enter and .49 when you exit?
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