Spread Pop at Rollover on FXCM? | Forex Factory

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Spread Pop at Rollover on FXCM?

  • #1
  • First Post: Nov 14, 2012 11:55am Nov 14, 2012 11:55am
I currently trade with FXCM and have noticed that on several pairs, mainly the CHF, NZD, and some GBP crosses, that the spreads at the 5pm EST rollover will shoot to over 20 pips for a few minutes, then return to their normal 5 pips or so. The effect is, naturally, smaller on the more highly traded pairs.
I understand that this time of day is generally low volume as Asia hasn’t come on yet, so I would expect the spreads to be a bit higher around this time, but I’m talking about a large spike every day for just a few minutes, right at this time. Having been burned by these spread spikes in the past, I’ve resorted to actually moving my Stops manually for any trades that are within 25 pips of their stops, just until the spread goes back to normal, then moving the stops back. Naturally, I have to be at my computer at Rollover time to do this, so it’s a bit of a pain.
Is this something that happens on all platforms, or is FXCM up to something here?
Thanks.
  • #2
  • Nov 14, 2012 12:17pm Nov 14, 2012 12:17pm
Quoting davidf515
I currently trade with FXCM and have noticed that on several pairs, mainly the CHF, NZD, and some GBP crosses, that the spreads at the 5pm EST rollover will shoot to over 20 pips for a few minutes, then return to their normal 5 pips or so. The effect is, naturally, smaller on the more highly traded pairs.
[font=Times New Roman][size=3]I understand that this time of day is generally low volume as Asia hasn’t come on yet, so I would expect the spreads to be a bit higher around this time, but I’m talking...

Can you post some charts where the spike are? I trade on FXCM, and if there's manipulation, there can be money made off that. (I don't think FXCM is a bad company for doing it, if they do any manipulation. It's part of the game.)
Play the players, not the cards.
  • #3
  • Nov 14, 2012 1:28pm Nov 14, 2012 1:28pm
I'm not sure how one would profit from spread widening, unless you're the Broker, but if you know how, I'm all ears. I'll try to attach a pic here that I snapped a while ago.

You can see for yourself in a couple of hours. Just look at the Simple Dealing Rates at 5pm EST.
Attached Image (click to enlarge)
Click to Enlarge Name: Forex Roll Spreads 1.png Size: 63 KB
  • #4
  • Nov 14, 2012 1:43pm Nov 14, 2012 1:43pm
Quoting davidf515
I'm not sure how one would profit from spread widening, unless you're the Broker, but if you know how, I'm all ears. I'll try to attach a pic here that I snapped a while ago.

You can see for yourself in a couple of hours. Just look at the Simple Dealing Rates at 5pm EST.
is this at 2pm EST?
  • #5
  • Nov 14, 2012 2:11pm Nov 14, 2012 2:11pm
No, I'm on the west coast, so it shows as 2 pm on my screen shot. I always refer to EST when discussing times, though. It seems that most people have an easier time with that. This happens at 2 pm PST and 5 pm EST.
  • #6
  • Nov 14, 2012 4:15pm Nov 14, 2012 4:15pm
Here's the CAD/CHF tick chart from today. Spread goes from 6 to 24 and back in just over a minute.

Also, here's a shot of the Dealing Rates at 2 minutes after 5 EST, 2 PST:

NOTE: If I hadn't temporarily moved my stop, I would have been Stopped Out at the upper Black Line.
Attached Image (click to enlarge)
Click to Enlarge Name: Forex Roll Spreads 11-14-12.png Size: 47 KB
Attached Image
  • #7
  • Nov 14, 2012 5:12pm Nov 14, 2012 5:12pm
Have you spoken to FXCM about this?
Doing what you like is Freedom. Liking what you do is Happiness.
  • #8
  • Nov 14, 2012 5:28pm Nov 14, 2012 5:28pm
Quoting realjumper
Have you spoken to FXCM about this?
No. Not yet. I wanted to try and find out here whether this was unusual, or just a "part of the game" that happens everywhere.
  • #9
  • Nov 14, 2012 5:56pm Nov 14, 2012 5:56pm
Quoting davidf515
No. Not yet. I wanted to try and find out here whether this was unusual, or just a "part of the game" that happens everywhere.
Its change over and liquidity suppliers have down time as well. I think you will find its standard practise.
  • #10
  • Nov 14, 2012 6:01pm Nov 14, 2012 6:01pm
Some firms shut down completely between 5:00 and ~5:05 EST. I find that preferable compared to such wide spreads.
  • #11
  • Nov 14, 2012 6:16pm Nov 14, 2012 6:16pm
Quoting shrike
Some firms shut down completely between 5:00 and ~5:05 EST. I find that preferable compared to such wide spreads.
Agreed, spread widening can trigger stops, and if I wanted to hold past rollover then I wouldn't be looking to get out from 5-5:05 anyway.

Through, to be fair, if your broker does spread widening at rollover then that's something you should be aware of and take into consideration should you be holding into that time (if that means adjusting stops or taking other measures into account to manage the risk, so be it, but it's your job to make a choice on that that's what your broker does.)
FXGears.com
  • #12
  • Nov 14, 2012 7:09pm Nov 14, 2012 7:09pm
Quoting Jack_Larkin
Agreed, spread widening can trigger stops, and if I wanted to hold past rollover then I wouldn't be looking to get out from 5-5:05 anyway.

Through, to be fair, if your broker does spread widening at rollover then that's something you should be aware of and take into consideration should you be holding into that time (if that means adjusting stops or taking other measures into account to manage the risk, so be it, but it's your job to make a choice on that that's what your broker does.)
I Agree. But should I be looking for another Broker that DOESN'T do this, or would that be a waste of time (because they all do)?
  • #13
  • Nov 14, 2012 7:29pm Nov 14, 2012 7:29pm
Quoting davidf515
I Agree. But should I be looking for another Broker that DOESN'T do this, or would that be a waste of time (because they all do)?
It's really up to your personal preference.

Some brokers do the widening thing, some just shut down for 5 minutes during that time... both are common.

In either case though, liquidity drys up a bit leading into 5pm and for a little bit after, so spreads will naturally widen slightly during that time anyway.. the main difference is in how wide they get.

Again, if you trade with a broker who goes the spread widening route, just be very aware of what's possible for your pair to do during rollovers and manage risk accordingly... Say, for instance, you're ~10 pips away from being stopped out leading into 5pm, there's no sense in increasing risk by moving your stop further out, so you could just close the position up front then reopen it after the spreads tighten again (assuming your reason for being in the trade is still valid.)
FXGears.com
  • #14
  • Nov 14, 2012 7:40pm Nov 14, 2012 7:40pm
Sounds like a broker that just shuts down for a few minutes might be a good idea. As shown in my example above, I would have been stopped out of my CAD/CHF position by the quick spread increase had I not been able to move my stop. I have been stopped out many times by this in the past when I was not able to be at my computer during rollover to temporarily move my stops. Something for me to think about.
  • #15
  • Nov 14, 2012 9:29pm Nov 14, 2012 9:29pm
Quoting davidf515
Sounds like a broker that just shuts down for a few minutes might be a good idea. As shown in my example above, I would have been stopped out of my CAD/CHF position by the quick spread increase had I not been able to move my stop. I have been stopped out many times by this in the past when I was not able to be at my computer during rollover to temporarily move my stops. Something for me to think about.
Well, I have always found FXCM very reasonable to deal with on the phone, and they will always email a confirmation of what they say if you ask. I would simply ring them up and ask them! Can't beat going straight to the source for the best information!!!
Doing what you like is Freedom. Liking what you do is Happiness.
  • #16
  • Nov 14, 2012 11:42pm Nov 14, 2012 11:42pm
Quoting davidf515
No, I'm on the west coast, so it shows as 2 pm on my screen shot. I always refer to EST when discussing times, though. It seems that most people have an easier time with that. This happens at 2 pm PST and 5 pm EST.
  • #17
  • Nov 15, 2012 3:11pm Nov 15, 2012 3:11pm
Quoting davidf515
I currently trade with FXCM and have noticed that on several pairs, mainly the CHF, NZD, and some GBP crosses, that the spreads at the 5pm EST rollover will shoot to over 20 pips for a few minutes, then return to their normal 5 pips or so. The effect is, naturally, smaller on the more highly traded pairs.
[font=Times New Roman][size=3]I understand that this time of day is generally low volume as Asia hasn’t come on yet, so I would expect the spreads to be a bit higher around this time, but I’m talking...
Hi David,

As the others have mentioned, 5pm EST (2pm PST or 10pm GMT) marks the end of one trading day and the start of the next. It's not uncommon for banks to widen their spreads for a few minutes around this time as they roll positions to the new day. Some shut down completely for a couple of minutes to reset their servers. That's enough time for banks to refresh their systems, apply the appropriate amount of rollover interest to open trades and prepare for the new trading day. The reason they choose this time to do it is because the New York session has ended and it's still a couple of hours before trading picks up in Tokyo. It's a relatively quiet time in the market. On our NDD execution model, we simply pass on the prices we receive from our liquidity providers plus a pip markup, so you'll see our spreads widen at 5pm too. Since it happens at the same time everyday, that can help you in planning your trades.

Jason
  • #18
  • Nov 15, 2012 3:28pm Nov 15, 2012 3:28pm
Thanks for the response Jason, and everyone else for your input.

I guess it's just a fact of life that this will happen. I currently have a position in CAD/CHF that is about 15 pips away from my stop. If it's at the same level when the roll comes around about 40 minutes from now, I'll have to either close out the position and wait for the "Spread Bubble" to pass, then re-enter, or just move my stop farther away temporarily.

Each has it's downsides: Close / Re-open means losing the amount of the spread, while moving away the stop runs the risk of a big suprise move resulting in a large loss. Decision, decisions.

Maybe I'll see if the programming guys at FXCM can build a strategy that automates one of these options so I don't have to do it manually every day.
  • #19
  • Nov 15, 2012 10:02pm Nov 15, 2012 10:02pm
Quoting davidf515
I currently trade with FXCM and have noticed that on several pairs, mainly the CHF, NZD, and some GBP crosses, that the spreads at the 5pm EST rollover will shoot to over 20 pips for a few minutes, then return to their normal 5 pips or so. The effect is, naturally, smaller on the more highly traded pairs.
[font=Times New Roman][size=3]I understand that this time of day is generally low volume as Asia hasn’t come on yet, so I would expect the spreads to be a bit higher around this time, but I’m talking...
it's FXCMs little way of cleaning out tight stops!
The best indicator is price.
  • #20
  • Last Post: Nov 16, 2012 1:10pm Nov 16, 2012 1:10pm
Quoting davidf515
I currently trade with FXCM and have noticed that on several pairs, mainly the CHF, NZD, and some GBP crosses, that the spreads at the 5pm EST rollover will shoot to over 20 pips for a few minutes, then return to their normal 5 pips or so. The effect is, naturally, smaller on the more highly traded pairs.
Hello davidf,

Spreads during rollover may increase for the same reason they increase during news events or trading open....liquidity. More liquidity and greater price competition drives spreads lower. Less liquidity will drive spreads wider. The same principle is in effect when you compare spreads on a very liquid currency pair such as the EUR/USD versus a less liquid currency pair such as the EUR/TRY. Whenever liquidity decreases spreads may widen.

Second, FXCM isn't deciding the spread levels on NDD forex execution. There are 10+ liquidity providers streaming prices, and the best bid/ask is then automatically displayed onto the platform with FXCM's pip mark-up. We've created a video to show you from start to finish how pricing and execution works
Inserted Video


Let me know if you have any questions, and I'm always available to answer questions on the FXCM Discussion thread as well http://www.forexfactory.com/showthread.php?t=8960

Jason
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