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Broker Manipulation

  • #81
  • Aug 5, 2012 8:28pm Aug 5, 2012 8:28pm
LMAX exchange feed here. High was 1.24044, Low was 1.21340.

Quoting Sebastiaan76
The fact that differs from Yahoo is irrelevant, and is probably attributable to different liquidity providers and data feeds.
Pretty much.
  • #82
  • Aug 6, 2012 3:48am Aug 6, 2012 3:48am
Quoting ez0770
Hi RoBiK,

do you have any direct experience in the HFT space within forex? Do you think it's possible for algos to employ similar strategies as the ones they (supposedly) employ in the equity and futures markets?
hi,
there is no precise definition of HFT but i work with algos that make decisions and execute trades in a sub-second manner. I definitely do not play the latency driven game because it requires very large investments and provides diminishing returns. Forex is handled OTC so in context of HFT it is quite different from trading on exchanges. I know that there are some players that do latency arbitrage between different liquidity providers and/or venues. The OTC nature of Forex makes a lot of shady HFT gaming possible but i have no knowledge of anything concrete.... but i guess if something is possible and it leads to profits than someone will do it.
I'm not insane; my mother had me tested.
  • #83
  • Aug 6, 2012 4:43am Aug 6, 2012 4:43am
I know algos are a growing presence in the FX space and I know that they, for one thing, put many "fake" orders to probe the market and to try and influence the order book to their advantage. EBS is now trying to limit their activity, as previously mentioned.

If they can actually manage to have such a big market impact on stocks, I wonder if they can achieve similar results in such a liquid market as fx....also although fx is an otc market, I wonder if a broker can sell customer flow information to hft firms or use it themselves when operating as a market maker to the detriment of their clients.

One thing is for sure, if HFT are trading FX, it's because they are making money out of it

Quoting RoBiK
hi,
there is no precise definition of HFT but i work with algos that make decisions and execute trades in a sub-second manner. I definitely do not play the latency driven game because it requires very large investments and provides diminishing returns. Forex is handled OTC so in context of HFT it is quite different from trading on exchanges. I know that there are some players that do latency arbitrage between different liquidity providers and/or venues. The OTC nature of Forex makes a lot of shady HFT gaming possible but i have no knowledge of anything...
  • #84
  • Aug 7, 2012 4:07am Aug 7, 2012 4:07am
Still referring to the the revent actions taken by Icap/EBS to limit algo activity on their platform....

http://www.reuters.com/article/2012/...8IA9DO20120710
  • #85
  • Edited 8:58am Oct 8, 2012 4:09am | Edited 8:58am
Going back to the thread-starters initial assertion that brokers manipulate price feed.. For sure. All pricefeeds are "indicative". Yes manipulation and delay of price feeds is widely used by brokers - anything "indicative" is manipulable. If it doesnt deter Barclays in the case of LIBOR, its hardly going to deter an FxBucketshop? It is very difficult to prove pricefeed manipulation as EATMYPIPS has tried to do, because different brokers have access to different liquidity pools, and genuine differences exist all the time between these. However in the interbank, arbitragers are there to keep that process somewhat honest.
So thats OK then? Sorry NO!
The KEY issue is that in the retail space no such constraints exist.
Can you prove it? Very difficult. Youll need access to a true EBS/Reuters feed and ideally have the software to compare with your retail? But this v difficult for retail trader. I recently had a friend trading with MIG Bank who was filled in low volitility 6 pips below the bid. And the price filled at didnt occur on the Banks pricefeed for over 60 second AFTER the fill. How blatent is that? The Banks answer.. Ooops sorry.. our pricefeed is only indicative and it was "delayed" .. anyway read our small print.. LoL. I advised him to make formal complaint to FINMA. But to have no real hope of any result.

STP is supposed to help with this problem, but even there at least two further problems arise (a) "HOW STP" is the feed, and what filters is it subjected to, and (b) how big or representative is the pool accessed, reflective of EBS/REUTERS or are counterparty banks filtering their prices into a sub-pool?. So even there its not simple.

Finally Ive only mentioned here some issues in actual pricefeed manipulation.
Execution manipulation is a different issue.

For what its worth.. hope it helps.
  • #86
  • Oct 13, 2012 3:23pm Oct 13, 2012 3:23pm
Quoting Eatmypips
Hello, I finally figured out today why I have been losing at forex trading so badly for the last two months after previously trading quite successfully. Looks like IB has been manipulating my charts by up to 10 pips against me while in a live trade, after doing a cross chart check. Can anyone please post a 15 minute chart here of todays aud.usd chart with non-farm news spikes? I would like to compare all the spikes on my chart to another price feed which is hopefully reliable? IB has stolen approx 14 000 Euro in two months.
What you are guessing about your broker is not impossible. Devil brokers can do this as they have many software. I have heard this complain before from many traders. I think it's a fact not only a guess.
So change your broker. You can get information all broker from
Broker's review.
  • #87
  • Oct 13, 2012 10:52pm Oct 13, 2012 10:52pm
What I think is happening now is retail brokers are using S.T.P but the same games are now played by the liquidity providers, with big budgets and HFT, this way the retail broker and the system appears even more legit (hey my hands are clean ).

The retail broker pays a fee for the already manipulated data and service and in return the Retail broker provides clients to milk.

I have been trading FX for many years and you can easily tell now when the algos are in or not. Time wise it's greater than 90% of the time. The big moves are easily heard controlled and orders are filled normally. The times I read now from experienced traders 'whenever I place a trade the price moves against my position'. This should only happen 50-60% of the time but it happens 99% of the time now.

I think the comment I read about the intentional introduction of 5 digits decimal points sums it up well, it introduced more volitility. I would not be surprised if the number of spot traders were to decline, 6 digit decimal points would be introduced to generate more profits. Forcing traders to shift to even longer time frames to avoid the manipulated noise, and less likelihood of making profits. One of the best ways I can see to try and eliminate price curruption and manipulation would be to revert back to 4 digit.
My comments are not to be taken as trading advice, not a financial advisor
  • #88
  • Oct 14, 2012 1:32am Oct 14, 2012 1:32am
Quoting cogs
What I think is happening now is retail brokers are using S.T.P but the same games are now played by the liquidity providers, with big budgets and HFT, this way the retail broker and the system appears even more legit (hey my hands are clean ).

The retail broker pays a fee for the already manipulated data and service and in return the Retail broker provides clients to milk.
Can't say I agree here, since liquidity providers can't see positions, account balance, or any info of the trader directly... all they get is the retail order flow to fill. Like, price by size numbers and that's it, the broker handles matching order numbers to accounts while monitoring margin and such.. That's actually the big plus of trading through some ECNs or exchanges where the broker represents the client; the LPs don't know who you are, they just see order ticket numbers.

What I do agree with is the use of HFT. That's a given. Computers do some jobs much better, and providing liquidity or crushing out price differences with arbitrage is a job cut out for them. I kinda just accept them as a reality and base my trading choices around them.

That's the nature of the market though, it adapts to modern conditions, and as traders we need to adapt too.

In equities, HFT has dominated trading volumes, and while a lot of traders complain about it, the best firms/traders simply adapted to deal with it. The market doesn't give out free cash, you gotta work for it after all. Adapting is part of the game.

(Example: in the mid-80's and earlier it was common to notice price arbitrage opportunities and even have time to call in an order between different market brokers to execute on it. Once more exchanges lit up with electronic access, this got crushed out by computers. Traders complained about this back then, but the good ones evolved and moved on (or were the ones writing the algos in the first place.))

Quoting cogs
I have been trading FX for many years and you can easily tell now when the algos are in or not. Time wise it's greater than 90% of the time. The big moves are easily heard controlled and orders are filled normally. The times I read now from experienced traders 'whenever I place a trade the price moves against my position'. This should only happen 50-60% of the time but it happens 99% of the time now.
Err... what?

I'm not trying to question your experience here, but there's no way a market will move based on just one trader's position. There's so much order flow going on each second, a trader's position is entirely lost in the noise. HFT's on or not, what you are describing simply won't happen targeting a single trader.

What I think is probably more common is the inflexibility of a trading style that's no longer in favor with the market. Like, if you notice recently your trade method gets stopped out a lot, it's probably because the market is getting more efficient and that particular edge is becoming dull. Perhaps it's time to adjust?

It takes millions in notional value just to budge a currency by a 1/10th of a pip (on most of the majors that is.) There's no way an HFT algo will crush billions worth of market orders in one direction just to stop your 1-5 lot order out. It just doesn't make sense (or dollars.)

Collectively, if HFTs all act together trying to play on a statistically significant setup (like they all by chance are set to execute on the same signal,) then maybe they'll hunt an obvious stop level or move prices past a threshold after a given pattern... but again, if this is common, then you have a working strategy to play off it right in front of you.

Heck, I have two strategies I use on the majors based on fading price areas I know probably will be hit thanks to traders being in bad trades. I call this the "what would the market have to do to screw the most people right now" trade. I look at a chart, see common patterns, bet they get chopped up or pushed past. Remember that the market loves to exploit human nature...


Quoting cogs
I think the comment I read about the intentional introduction of 5 digits decimal points sums it up well, it introduced more volitility. I would not be surprised if the number of spot traders were to decline, 6 digit decimal points would be introduced to generate more profits. Forcing traders to shift to even longer time frames to avoid the manipulated noise, and less likelihood of making profits. One of the best ways I can see to try and eliminate price curruption and manipulation would be to revert back to 4 digit.
I can't see 6 digits happening anytime soon. The article talks about how 5 digits made "price discovery" harder and slower because more liquidity became posted between pips (real or not,) and a trader can't hammer prices around as easily with everything in between them and a price point. It makes judging depth harder. So basically it makes manual trading by reading a price book harder for the types of traders who sit at desks at banks an execute orders (ie, not very technology driven financial entities, or EBS's core client base.)

I like 5 digits and until all the majors are constantly at 0.1 pip spreads at all times of the day, there's little need for 6 digit pricing.

I actually like the idea they purposed in the article for EBS, which is to switch to a 4 and 1/2 digit system. Using half pips like mid-points between the pips that can be quoted.



Anyhoo.. not picking on you or anything, just thinking out after reading your post.
FXGears.com
  • #89
  • Oct 14, 2012 5:09am Oct 14, 2012 5:09am
I don't use physical stops although when I do with pepper they aren't spiked out which is good to see. I use mental stops.

I have been asking around to try and have an indicator made up to measure price reaction to opening positions but it seems quite a task. Price reaction to opening a position is negative so many times to be just coincidence or sheer bad luck. It is mostly noticeable on M1 charts which with liquidity providers is where they have most control.

Quote
Can't say I agree here, since liquidity providers can't see positions, account balance, or any info of the trader directly... all they get is the retail order flow to fill
Can you be certain of that, have you seen their back end programs? Do they need to if they have software to take care of it for them? The retail broker sees all, so it would be quite benificial for the liquidity provider to see it also.

Something else also struck me as strange is order placement. I have tried placing 'do not care' orders in all the wierdest places and yet the price always seems to come back and freeze/hover around where my order was placed. Sure bars will illustrate movement elsewhere but it is actually only for a split second. Orders seem to only be filled in clumps around specific price zones to be better managed.

4 1/2 digits sounds sensible and tradable. 5 digit is way too noisy but tends to lead price direction now days.

I like to think the game hasn't changed, but I am certain it has, particularly when old school guys start joining in on conversations.
My comments are not to be taken as trading advice, not a financial advisor
  • #90
  • Oct 14, 2012 5:33am Oct 14, 2012 5:33am
I have been using IB for the last 6-7 years now trading fx and equities. I have lost hundreds of thousands in the past, but I have also made hundreds of thousands with them. What I find is that as long as you trade for a longer time frame, and use leverage not exceeding 1:10, you're ok. Btw I never use IB's charts cos I personally think they suck lol. I use dukascopy which I find is a lot better. I don't scalp, as I've learnt the hard way that I suck at timing it, but go for 30pips and up gains.
  • #91
  • Oct 14, 2012 1:04pm Oct 14, 2012 1:04pm
Quoting Eatmypips
Hello, I finally figured out today why I have been losing at forex trading so badly for the last two months after previously trading quite successfully. Looks like IB has been manipulating my charts by up to 10 pips against me while in a live trade, after doing a cross chart check. Can anyone please post a 15 minute chart here of todays aud.usd chart with non-farm news spikes? I would like to compare all the spikes on my chart to another price feed which is hopefully reliable? IB has stolen approx 14 000 Euro in two months.
So have you made your €14,000 back?
No longer trading forex. Looking for full time job.
  • #92
  • Oct 14, 2012 4:18pm Oct 14, 2012 4:18pm
Quoting cogs
I have been asking around to try and have an indicator made up to measure price reaction to opening positions but it seems quite a task. Price reaction to opening a position is negative so many times to be just coincidence or sheer bad luck. It is mostly noticeable on M1 charts which with liquidity providers is where they have most control.
I'm not sure how to respond to be honest, it just sounds like you're being confused by noise. I mean, I understand what you're saying, and I get that it must be frustrating if you believe this is happening, but it doesn't make logical sense to me given what I understand of the market.

For instance, the very HFTs you mentioned before would be part of what helps keep your price feed in check and safe. If a broker or liquidity provider moved prices down by a few pips in order to shake a trader out, they would be completely destroyed by all the algos that just sit there and run triangular arbitrage strategies (and there are a lot of banks that run these, they like low risk money.)

Plus, in most cases brokers use multiple liquidity providers, if one wanted to run the price, others would just be the next best bid/offer and price wouldn't move.

You could then look at other currency markets, such as currency futures, and see how they'd pretty much follow the same price movements as spot (price action wise, and movement sizes, though exact quotes might be different since futures factor in some interest (front month) and implied volatility (back months) into their prices. Point is the movement is the same, 10 pips up on one market will see 10 pips up on another, if not, HFTs will crush out the difference since they can hedge out for no risk.)

So even if the liquidity provider still wanted to move the price, they'd have to do what I mentioned in my previous post, and push millions around just to make a dent in the price. That can't make sense for them just to stop you out of a small trade.

Lastly, it's not like you're the only trader taking random trades either.

Try this: find two trades in your broker's history, notice the difference in the ticket numbers (order IDs) and notice the time difference between the two trades. You'll get a very rough idea of how many orders were filled in just a short period of time. Then times that amount by two, since each order is opened (one trade) then closed (another trade.) Then multiply this amount by how many popular brokers there are out there.... are you starting to see how there's far too much noise in just retail order flow for a liquidity provider to gun against just one trade?


Quoting cogs
Can you be certain of that, have you seen their back end programs? Do they need to if they have software to take care of it for them? The retail broker sees all, so it would be quite benificial for the liquidity provider to see it also.
I can't speak for all brokers, but of the ones I've personally traded with they usually have this sort of relationship defined in their terms and conditions or product disclosure documents. If the broker is going to share too much information or isn't regulated locally in that respect, then I simply don't consider them for trading.

While there's no way for me to physically see a broker's back office and verify if what they claim is true, I simply won't waste my time with such fears since the mechanics of the market itself (as I wrote about in the first part of this post) prevent such shady things from affecting my trades.



Quoting cogs
Something else also struck me as strange is order placement. I have tried placing 'do not care' orders in all the wierdest places and yet the price always seems to come back and freeze/hover around where my order was placed. Sure bars will illustrate movement elsewhere but it is actually only for a split second. Orders seem to only be filled in clumps around specific price zones to be better managed.
There could be something to this, like how human nature would cause orders to bunch up around the same price levels (even numbers, even quarters, etc..) And larger institutions would manage orders as best they can, in clumps, causing the market to quiver slightly at times...

...but then it wouldn't mesh with any individual trade getting gunned by LPs, since we're talking about clusters of trades from all sorts of traders (retail, corporate, institutional, hedgers, speculators, etc..)


Quoting cogs
4 1/2 digits sounds sensible and tradable. 5 digit is way too noisy but tends to lead price direction now days.

I like to think the game hasn't changed, but I am certain it has, particularly when old school guys start joining in on conversations.

To be honest, I get tired of meeting "old school" traders who complain about the market not making them any money lately. They reek of being set in their ways and not interested in learning or adapting. This industry is constantly changing, there's no question about that. For every old trader I meet, I meet tonnes of new successful traders who are doing well in the same condition with strategies that better suit the current market.

I read an article a few months back in a popular newspaper (or maybe magazine, I'll have to search it out) about a bunch of old bank traders who were pissed their ways of trading have been chopped to all hell since the credit crisis. How they can't just hop on a strong weekly trend and ride it out to profits anymore. It was completely silly that they would rather bitch about the market then accept it's not going to be the same as it was in the past. They didn't want to adapt, just complain and hope exchanges and regulators would help them.

Personally, I'd love to just hop on a strong weekly trend and make dumb money like they used to, but I wasn't trading back in the 80's and 90's when that worked... lol
FXGears.com
  • #93
  • Oct 15, 2012 7:29am Oct 15, 2012 7:29am
Currency manipulation takes place on a daily basis. This does not mean you cannot profit from it, think about it. Many traders blame their brokers for their misfortune. If you believe stop hunting is conducted against your trades it is not only you but many other traders. Try and change your entries and give more slack to your stop. Compare the quotes with other platforms and see to ensure the stop hunting wasnt too aggresive. If it is you can ask for a refund or forward the matter to the broker's regulations
  • #94
  • Oct 15, 2012 7:40am Oct 15, 2012 7:40am
Enter where you believe clustered orders will be = profit.
  • #95
  • Oct 15, 2012 3:31pm Oct 15, 2012 3:31pm
The interchange of ideas on this thread are very encouraging.
IMHO. its probably the most important subject being discussed on FF at the moment.
Happily you guys that have been participating more recently have been genuine, thinking and analytical in your dialogue, and your disagreements at times, as is natural, nevertheless make for a really interesting and worthwhile exchange of views. A real contribution.

However,knowing both the interests of some parties here on FF and in the industry, in the disruption and obfuscation of the issues being discussed here, be prepared next for the provocative confrontational poster that seeks to create acromony and diversion in the genune discussion that is taking place.

Do I sound cynical? Guess Ive been a member for too long..LoL
Anyway..lets hope the current civilised exchange of views can continue a bit longer, I for one will be an enthusiastic reader.

Thanks guys.
  • #96
  • Oct 15, 2012 8:54pm Oct 15, 2012 8:54pm
Quoting cliffedwards
The interchange of ideas on this thread are very encouraging.
IMHO. its probably the most important subject being discussed on FF at the moment.
Happily you guys that have been participating more recently have been genuine, thinking and analytical in your dialogue, and your disagreements at times, as is natural, nevertheless make for a really interesting and worthwhile exchange of views. A real contribution.

However,knowing both the interests of some parties here on FF and in the industry, in the disruption and obfuscation of the issues being...
Yeah, I hear you there.

I can write all I want explaining the mechanics of the market and stack of financial institutions that make up liquidity, but in the end some brokers are outright shady and rip people off, leading to traders accusing everyone of being evil... It's a good thing traders are naturally skeptical in this industry, but it can lead to a lot of false positives when analyzing a broker.. then toss in all the mixed reviews you find online and we get a pure crud show with blinking lights and music.

It makes things... frustrating, especially when you see misconceptions being spread around and traders ready to lynch a broker who's done nothing wrong.

A great example is the common sentiment with traders that market making is a bad broker model. This was fueled by brokers who rode on the sentiment to make their (new at the time) STP model stand out. Heck, FXCM had a TV spot showing a trader having cash taken right off his table, stolen by a "market maker" who was "trading against them", talking as if NDD/STP was the next best thing since sliced bread...and yet, recently they just opened up a new dealing desk model. Funny that.

Evil brokers will do evil things no matter what model they claim to be. ECN brokers can screw with accounts too.. Still to a well regulated broker, who's not screwing you around, and just make sure their execution style fits with your trading needs. Done.
FXGears.com
  • #97
  • Oct 15, 2012 8:57pm Oct 15, 2012 8:57pm
Quoting GDR3k
Enter where you believe clustered orders will be = profit.
Yup, I have a shimmy maneuver I try to do on the EURUSD when even penny levels are reached. It's usually good for a scalp but it takes a little research to figure out just how many orders are bunched up and need to get filled should the level get triggered... (Oanda's order book and currency futures depth of market are good for this.)
FXGears.com
  • #98
  • Oct 16, 2012 3:29am Oct 16, 2012 3:29am
Quote
So even if the liquidity provider still wanted to move the price, they'd have to do what I mentioned in my previous post, and push millions around just to make a dent in the price. That can't make sense for them just to stop you out of a small trade.

Lastly, it's not like you're the only trader taking random trades either.

Try this: find two trades in your broker's history, notice the difference in the ticket numbers (order IDs) and notice the time difference between the two trades. You'll get a very rough idea of how many orders were filled...

I have pushed the share market around myself, it is very easy if you can see depth, after all this is what HFT is. Many orders are placed and withdrawn without being filled merely to move the price, as long as these orders are larger than what currently exists in depth the market will move accordingly. Many times a day during the asian market liquidity drops right off and commercials can push the market where ever they want until bigger guns come in, see a bargain and take over. I have also had algos play with my trades in the futures market, it's actually interesting to watch.

If you don't believe the liquidity drops off try and trade the weekly open with real spreads not MM spreads. As has been mentioned by Chris when he was with Go and many other brokers, spread gets up around 50 - 60 pips (4 digit). Christmas time is another example of how thin it gets. Liquidity is only there thanks to the MM's, and with that provides leverage of pricing.

As mentioned previously the idea is to profit from it.

Many snake oil salesmen at seminars attempting to sell their product talk of the trillions that gets transferred/traded via FX daily, but it must be taken in the correct context. Their context and the broad statement is referring to all pairs and 24hr/day. Cut that down to 1 pair at a given time of day.

Somewhere there is a post mentioning (and linking to data) the number of spot traders in the US and it is only approx 18,000, which surprised me. I thought the US would be the largest market. Now what portion that is of all transactions may be marginal, but still surprising and makes for curious thoughts of number of transactions per minute (lets say), an hr after Sydney open.

I find it a little hard to grasp "tonnes of new successful traders who are doing well" when 99% of all FX traders lose there money? I'll hang on to that one in hope.
My comments are not to be taken as trading advice, not a financial advisor
  • #99
  • Last Post: Edited 6:07am Oct 17, 2012 5:46am | Edited 6:07am
Firstly, this is the kinda dialogue I enjoy, where two people can compare views and both sides have strong points. Leads to learning and shared understanding. Cheers to that.

Quoting cogs
I have pushed the share market around myself, it is very easy if you can see depth, after all this is what HFT is. Many orders are placed and withdrawn without being filled merely to move the price, as long as these orders are larger than what currently exists in depth the market will move accordingly. Many times a day during the asian market liquidity drops right off and commercials can push the market where ever they want until bigger guns come in, see a bargain and take over. I have also had algos play with my trades in the futures market, it's...
Yeah, I hear you. On not so liquid times/pairs it doesn't take a lot to push it around by a pip or so. Pairs that have under 10 million within a pip on the book can be punted about by traders with deep enough pockets.

I was speaking very generally, and I should have clarified that the examples I was giving were for liquid pairs or the majors.

At the same time though, the market is one big poker game between large firms. Sure an institutional account swinging a few million can kick around a currency pair, but other players are looking to profit from it as well, and heck, some companies focus on identifying HFT activity (though detection of posted then pulled orders, and how price reacts to filled orders, etc..) to game HFT shops.

Regardless of the pair, even ones so illiquid at times that that even a modestly sized retail account could dent it by a pip or so executing an order, it still does take capital to move the price around a significant amount against a trader. Flash orders (the HFT method you mentioned before of posting large sizes then pulling orders) might spook prices, but without firm action the price won't really move (again, I reference arb algos, beyond a point it becomes an arb opportunity and there's a lot of capital at large shops allocated to arb strategies.)

My point is, if one HFT shop has to commit to X exposure (or potential exposure should a flashed order get filled) to shake a trade, that exposure is probably going to be more than the individual trade's value it's gaming. Another shop could step in, and run the HFT shop's play right over.

Story time:

In the equity world, where my day job is focused, pushing around prices by layering larger order (now an illegal activity on most exchanges) worked well, and a few of the older traders I talk to have fond memories of crushing stocks that were thin enough (read, very little on the book and a wide spread) by doing this.

The only trouble was, once in a while another trader hunting this activity would notice, and would fill the pusher's flash order in full, then take price against them by a few pennies... this would lead to huge losses for the pusher, often many times more than the trader made doing the 'pushing' strategy that week all in one bad trade. So in the end, like any strategy, there's risks involved and there's no free lunch.

The HFT we see these days might be able to shimmy around prices a little and try to do the same, but they might get hunted just as well.


Quoting cogs
If you don't believe the liquidity drops off try and trade the weekly open with real spreads not MM spreads. As has been mentioned by Chris when he was with Go and many other brokers, spread gets up around 50 - 60 pips (4 digit). Christmas time is another example of how thin it gets. Liquidity is only there thanks to the MM's, and with that provides leverage of pricing.

As mentioned previously the idea is to profit from it.
Well, I'd argue that a MM's quote "is" the market should the underlying banks have much wider spreads. I'd even go so far to say it's entirely fair since the trader would be getting better quotes thanks to the activity (move around by the MM or not, if the spread is thinner within the bank's spread it's still a better price.) The only thing that stops me from saying "fair" is the trader probably not being able to see the underlying market. I donno, for that I kinda stick to watching currency futures as an aid (even though it's not perfect.)

I actually feel conflicted here. If a MM, bank, liquidity provider, whoever wants to quote a price and show what volume they'll take on it, then that "is" the market regardless of how it moves.. my mind just goes back to equities and I think "NBBO", national best bid / offer...

I don't want to get caught up in terminology.. just saying.

Quoting cogs
Many snake oil salesmen at seminars attempting to sell their product talk of the trillions that gets transferred/traded via FX daily, but it must be taken in the correct context. Their context and the broad statement is referring to all pairs and 24hr/day. Cut that down to 1 pair at a given time of day.

Somewhere there is a post mentioning (and linking to data) the number of spot traders in the US and it is only approx 18,000, which surprised me. I thought the US would be the largest market. Now what portion that is of all transactions may be...
LOL.. yeah, my words before referenced liquidity, not transactions. I'm not here to convince anyone that the market is solid because of the transaction volume being executed, I'm just trying to point out that the liquidity available between cross markets (futures, forwards, swaps, etc..) and cross pairs can make moving any liquid pair around (to a significant degree) a costly endeavor.

Wow.. that's a really low amount in the US. I know there are ~34k active equity traders at firms in the US (that's institutional, not counting retail.) So maybe 18k is right for FX spot.. just seems like a really small pie to be split up between the US brokers, especially with how much overhead they have conforming to US regulations.

Think I might dig around some US only broker's CFTC reports and see what their account numbers are like.


Quoting cogs
I find it a little hard to grasp "tonnes of new successful traders who are doing well" when 99% of all FX traders lose there money? I'll hang on to that one in hope.
Yeah, that was a generalization about trading across all markets, not specifically about the FX spot retail market.

At the first firm I worked for back while I was in school, about 1 in 10-20 make it day trading US and Canadian stocks.. (that means, they turn a profit consistently and can live off trading income,) but that ratio came from a "hire a lot of people and see who works out" mentality they had.

The place I landed after has a much better track record. About 1 in 5 make it here. They spend more time interviewing candidates and micromanage their traders til they trust them enough to work on their own.

The time I spend talking to older, more experienced, traders is invaluable... and they have one thing in common, they talk about old strategies that were cool back in the day, but they moved on to what works 'today' and don't get stuck trying to force an old strategy on a market that won't take it.

The order pushing strategy is an example.. it used to work, they made good money from it, sometimes got slapped around once in a while, and the bad traders busted out with it all the same... but then the exchanges cracked down on the practice and they had to stop using it. Plus, other firms setup algos to take advantage of people posting orders they didn't intend to get filled.

The common thing I noticed was the older traders who did nothing but complain about a strategy not working, and who didn't like the new strategies that work, would become increasingly noisy about it til one day they leave... it really is an 'adapt' or die type industry.

So yeah, I was speaking generally about trading as a craft. Not specifically about retail spot FX, where the success rate is a lot lower (not necessarily because spot FX is a lot harder.. just retail spot FX attracts a lot people who just aren't in a good position to trade actively, having no risk manager to overlook them (which isn't saying they need one, but that they have to be their own risk manager and not everyone has the emotional capacity to do that), more leverage than what's healthy to use, and often they are trading with scared money.)

Anyway, that's enough rambling for me in this post... it's early morning and I gotta get ready.
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