Requotes and liquidity issues don't make sense for retail traders

Basic question: In an industry that boasts 4 trillion daily volume, with tens and thousands of lots committed daily, how can our tiny 0.1 lot trade, 1 lot trade, or even 10 lot trade impact the global market?

Slippage does make sense and it is possible during both high and low volume trading activity. I can see that. But requote? For retail traders?

I can see how banks would be hesitant to put $300 million trade. Liquidity issue is as clear as daylight. They want to be sure that they can get out of the trade when they want to get out. But us little fishes?

Common wisdom teaching introduces us the concept of requote for retail traders. When there is "not enough liquidity," even for the majors, your broker may requote you for a price that is different than your original request, giving you a disadvantaged entry/exit. And ALWAYS a disadvantaged entry/exit. If there is really a liquidity issue, the possibility of better price must also exist.

Does this have a justifiable and valid reason? in a 24/5, 4 trillion dollars market?

Are these guys saying that there is liquidity issue both at low volume and high volume trading activity, since those two times are the most likely to give us requote? So we have the same reason for 2 completely opposite situations? There is not enough buyers and sellers at low volume, AND high volume? I've seen FF members jump from ~8,000 members online to ~24,000 prior to news release, and you're telling me that there is less liquidity there?

In economics, the higher the number of market participants, the lower the price for transaction due to competition and the easier it is to make a trade.

So the question is: why does requote happen to retail traders? How is it that my 0.1 lot size trade affecting the global market?

Even if, that's a big if, there is a serious or no liquidity at all, shouldn't we get a total rejection of the trade instead of offering a new and ALWAYS worse rate? The broker may say "dude, it's 1 am, nobody trades at this hour. Go home, get a life." Your first reaction to my seemingly silly question would be, "you fool, there are simply no buyers/sellers JUST at that particular point of price. That's why you get requote." Really? While everyone sees almost the same price and chart globally? When it's night in one session, it's daylight on the other. That's the whole premise of forex. 24/5 market.

I know requote traditionally happens with MM brokers who trade against you. But I heard this also happens with ECN brokers. The explanation in both cases is financial incentive, not real liquidity. I think this is just a trick that brokers use that has no validity at all. It's a made up trick of trade.

Bottom line: Requote and liquidity issue for retail traders DO NOT make sense at all. Correct me if I'm wrong.

.
Perhaps a few reflections would help.:

When people say that the forex market is the most liquid of all markets, it means that regardless
of what currency you want to purchase , or own and want to sell, you will find a counter party
and be filled in between a few pips. We are talking that even a 100 pips is just 1 cent on the USD.
So, we very much could never be stuck with a currency as we would with some stock or other instruments
that could go to zero and by the time we realize has no value at all.

Then, "Liquidity" is just an attribute that means the ability to liquidate a position quickly and not too far from desired price. Low or high liquidity does not mean high or low volume traded... Low means is more difficult
to liquidate and high easy to liquidate at the price we want.

The most important to think about is that is spite of the average daily volume of the 3 or 4 trillion
whatever "your" order size is, it is "part" of the market....and in the millisecond you place that buy
order of 10 000 units, it could happens the total orders are 1 trillion buy and half trillion sell.
Therefore only half trillion would be filled at the quoted price and the remaining who knows,
because depends of the next incoming orders.

If you think about it... our "retails" orders are not up there in the food chain.
Most likely, the participants of the best "Liquidity pools" will always get fill better when "big"
un-balance occur.

Everything helps to have good fills. You internet connection, time your order get to your Broker,
How good of a system your Broker has to grab prices from "Liquidity pools", and ultimately what Liquidity pool they use.

Adressing your question..:
Our order do not impact the market... the are "part" of the market.
Re-quote are part of the business... but re-quotes are not common with Direct market access, there you get what you get. It can be 20 pips spread at the moment and that is what you get... you must pay attention.
In the other hand for example, a market maker that charge a fix spread, will re-quote to the real price.
The bottom line is that we are "retail" and not getting the "best pricing" when more then usual un-balances occur.

J.

Thanks J. I knew it would be foolish to think that a country can run out of currency "stock" when they can simply print them.

I see. So we get the leftover stuff when the big guys had their trades done and that's the excuse for a requote.

But technically we should never get a requote IF our brokers put government's central banks as their liquidity sources. But they only have commercial banks listed...

Yea.. they can print... but means little for the "exchange" market. Used to mean a lot but not anymore. Printing does not mean
is going into the exchange market. But it can... is the case of the Swiss and the Japs. The "sell" loads of it when it seem appropriate
to them to devalue and protect their economy... at that point they become "participants" of the market.

I really don't feel that I get the leftovers or a victim. Actually, there is no "big guys" placing trades. Even if there were,
they would not be dumb to place "Big" order in one shot...knowing that the world market would not be able to fill it. They would
produce a spike in the quotes and probably get fill at the top like anyone else.

Think in term or context of the market as a whole. ... If you had the ability to "participate" worldwide, in all the liquidity
pools that exist, Having deposits with everybody to participate, Your system would see thousands of all kinds of quotes ..right? So you would
sit and buy the cheapest available and sell it right away to a higher price. That is what the Major player do. The big ten or
so you read around in many places including Wikipedia, Like DB, Citi, UBS, Barclay etc. They DO NOT "trade" in the way we know it.
They "market make" .. they buy the cheap money that "comes into" the market and resale it to their own clients such as Brokers hedge funds or whoever. So they very much grab all the "negatives" spreads because due to their financial strength then can. Those major player do not
speculate (hold) .... it is a in and out thing. (the key point to understand is that they have no influence to increase or decrease what "comes into" the market.. they can only work with what it does come).

So, now we are down to that the "best" we could get is a zero spread... and if we are lucky, buying or selling in "right" millisecond
we could even get a negative once in a while.

Now.. even with the worse "small" market maker you can find in the lower tiers, traders pay some 2 pips average.. how could anyone
could claim to be a victim with their small trading capital??. Even, how or why anybody with a 100K or more to trade would feel a victim
being able to buy or sell in between zero-1 pips +comm???


Central Banks do not provide liquidity .. they become "part" of the liquidity when they decide to "participate" (buy or sell) in the market.
And that is not often and only a few do it.. The Swiis and the Japs are the most common participants once in a while.

J

Slippages and re-quotes usually occur on entries/exits at market orders.

Might I suggest designing a strategy for yourself, where re-quotes and slippages don't impact your results?

Or use pending limit or stop entries/exits and a broker/bank that respects exact prices on pending orders, yes, they do exist.