What are the limitations of placing huge orders (such as a mil)

If you buy EUR/USD at exactly 1.1000 and from that price you only wanted to be there till 1.1020
Equals.. = 20 pips total from 1.1000 / 1.1020

Is there an amount of money that can not be put in a trade with this goal? Would a million or 10 million be able to be placed at 1.1000

I am thinking that maybe it can not, if you try at 1.1000 you will begin moving the market by lots of pips.. so maybe by the time it is 1.1020 it all happened due to your order going in and you basically only end up in your order with your 1 million when its already past your initial goal of buying at 1.1000 and getting out at 1.1020 for a 20 pip profit.

So.. I am trying to understand what limitations scalpers have in the amount of money they can place in to get at the exact price they intended.

1. Are you a retail trader (i.e. trading via retail brokers)? If you are, then you should know that a retail order can never "move" the market because the market is driven by institutional flows, not retail. I also dare to say "never" because if a trader can actually trade the amounts you mentioned, he wouldn't be trading via retail brokers.

2. Even if you are NOT a retail trader i.e. you are an institutional, you should know that even a 10 million order (of real money, not notional CFD contract size) can be too small to "move" anything.

3. If you happen to see price move 20 pips just after you put in a 10 million order, don't worry... it's not because of your order, because seriously, you're not that big.


My two cents.

Look up the concept of Volume-Weighted Average Price. This example isn't indicative of real liquidity, but let's say that across all of the market liquidity providers everywhere, there's 200 contracts worth of liquidity at a price 1 pip above what it is currently.

Imagine we've paused all market activities at the point in time where the price is precisely 1.1000.

1.1001 <-- 200 contracts available.
1.1000 <-- Current Price (let's just say there's only 15 contracts available).

Obviously if you're trading an instrument like the EURUSD things will be moving very, very quickly. If you buy 10 contracts you will most likely have your entire order filled at 1.1000, all other things remaining equal. However, if you buy 20 contracts at that price there simply is not enough liquidity at 1.000 and your broker will fill the remaining 5 contracts at the next lowest price where there is someone to take the other side of your order. So in this case, once again assuming that nobody else is trading at the same time as you (which there will be in reality!) you will have 15 contracts filled at the price you actually want, and 5 contracts filled at a price that is higher than your original entry point. This process also depends on what type of broker you have.

Hope this helps. Skenobi is completely correct, even though 20 contracts is a large amount of money don't expect to be able to make waves in the bigger picture.

nevermind

Do you mean if a trader can trade 100 lots, that trader would probably be with an institutional broker? If he/she doesn't want to move the market as their account grows, wouldn't it be better to be with a retail broker? What are the benefits of going with an institutional broker if you meet the account size requirement?

Are institutional traders' stops visible? That seems like it would be a bit of a concern for traders with large positions.

Danbrah, am not even sure I understand your question anymore, or even if you yourself know whether the answers to your questions will help you make more money (which I believe is the aim of every member here on Forex Factory), so speaking only for myself, I will refrain from attempting to answer further. I pray you find the answers you seek.

I'm gonna qualify my statement further: If a retail trader can trade the amounts Danbrah mentioned, he SHOULDN'T be trading via regular retail brokers (the apex of which would be firms like FXCM and Oanda) but he should actually be trading thru more sophisticated retail firms in the same class as Interactive Brokers, Tradestation etc etc.

If I mention "institutional broker", I will always mean interdealer brokers like Tullett Prebon, ICAP, etc etc. These brokers do not service retail traders.

If a junior institutional trader (i.e. a Bank trader) can't move the market with a single USD 10 million trade of real money (which is equivalent to 100 lots), what chance do you think a retail trader has of moving a faux market that is merely piggybacking the interbank market (i.e. the REAL market) with a 100 lot position (which is only a NOTIONAL position i.e. fake money)?

To answer your question pointedly: I believe you're assuming a retail broker can mask a retail trader's orders from the the big bad interbank traders, which may or may not be true. But the truth is, it doesn't even matter, because a retail trader CAN NEVER move the market in any way, shape, or form, either on his own or even in a horde of like-minded retail traders.

Taking into account my earlier answer, the correct question to ask would be "what are the benefits of going with a more sophisticated retail broker if you meet the account size requirement". I think the answers are pretty obvious i.e. like the difference between night and day.

No. In any case, even this doesn't matter if you learn how to anticipate order levels via horizontal support/resistance that you draw yourself. If you Google "how to draw horizontal support resistance lines", free lessons abound. Whether you believe it or not, ALL order levels have some basis on PAST support and resistance. For us old-timer institutionals (at least where I come from), this is nothing new.

Retail traders with large positions should be worried of maybe only two things (and none of the two involve institutional traders):
1. the robustness of their method in all market conditions.
2. the trustworthiness of their retail broker.

At the end of the day, price will go where it wants to go, and the REAL interbank market will determine that.

No, you are underestimating the whole thing.

1 Million (10 lots) don't have any impact at all on the eurusd, 100 lots (10 millions) too, don't really have any impact at all.

Maybe at the end of NY session when liquidity is pretty small, by placing a 100lots trade you can get a bad fill, like buy at 1.1000 and get filled at 1.1001 for example, but the "official" price will remain 1.1000.

As a retail trader you are never going to move the market, you are simply going to get filled where the liquidity providers of your broker have offers for you (this is why even if you get a bad fill of a pip, the market itself will not move, only you get the bad fill).

Then, on an active session (asian-london-ny) you can probably buy and sell 100 lots without have any bad fill at all.
Again it all depend on your retail broker and his liquidity providers, if you are a scalper and your average position is way bigger than 100lots you can take in consideration the idea to use an institutional broker, that would definitely solve any problem.

awesome, you made it real simple.
I was wondering because I was reading one of those threads of people who worked for big banks or people who made very huge orders. And I remember in their stories they were saying when the big orders would be placed the entire market was moving in that direction and they'd just stare in awe, plus i also remember that the guy was saying he couldn't place it all in one go and the order was going in slowly.
I don't know the amount they were talking about in that thread though.

Any idea what kind of amount in lots you'd be looking at to cause that movement

Thanks for clarifying skenobi. I can't yet see the night and day difference between retail and sophisticated retail brokers, but I'm probably not going to have a large enough account size that I ever need to know anyway

I don't know what he was meaning with "entire market was moving in that direction and they'd just stare in awe".
Let's assume that you trade using a prime broker or just a good institutional broker, so you have access to the real interbank, and let's say you buy 5000 lots of eurusd, and you literally move the market of.. let's say 2-5 pips? After such move, the market may as well get back down of 2-3pips in just a few seconds, and that's all.

It's hard to say how much the average volume is on eurusd, but we can make some calculations easily.
The average spot market daily volume is of around 1.5 trillions, the usd got an average 87% of this market share, followed by the eur (33%) and the jpy (23%), the gbp (11%), aud (8%) and other currency fall below the 5% mark.

We can so assume that the most traded pairs are: EURUSD (this is the one that have way the bigger share of the market), usdjpy, gbpusd, audusd, etc.

Now,( 87 (usd) + 33 (eur)) / 2 = 60%.

We can assume that 60% of 1.5 trillions of volume in the spot fx market is executed on the eurusd pair, that would be 0.9 trillions, or 900 billions, or 900.000 millions, or 9.000.000 lots traded every day on eurusd only.

Now, the 100 lots seems not a big deal anymore, surely not enough to drastically move a 9.000.000 lots/day pair.
And as i said before, even if you buy or sell 5000 lots all at once and move price of a few pips, if the overall trend is going on the opposite side, chances are the market will get back down in a few seconds.
Even if you buy 1.000.000 lots and bring up price of let's say (just guessing) 20 pips in a second, if the overall market structure of the day is pointing down, your 20pips upmove will be a big favour to the sellers that will use it to sell high, bringing eventually price down again in a few minutes.

The guy of the story was probably believing his trades on his retail broker was really moving the market, but it probably was just a coincidence.

Take care!