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Is Forex trading worth it? If so, why?

  • #441
  • Jan 13, 2016 1:17am Jan 13, 2016 1:17am
Quoting jmn5611
As a retailer, it helps to read the fine print. We, as retailers, do not have direct access to the FX market unless you trade futures contracts. Spot FX is an artificial market made by the broker. Now some brokers hedge against your order, but make no mistake, you as a retailer are on the books of your broker, and no one else. Your broker matches up orders, not the interbank. Now, that said, the broker may take the aggregate positions of all of us guppies and put that on the actual market. But we are not really a part of that. That is why there...
"Now, that said, the broker may take the aggregate positions of all of us guppies and put that on the actual market."

Bingo.

Brokers aren't in the business of speculating against their clients.
They want risk free returns, IE, spread markup/commissions
Be hopeful in a winning position, and fearful in a losing position.
  • #442
  • Jan 13, 2016 1:19am Jan 13, 2016 1:19am
Do you see the words "artificial liquidity" anywhere?

The distinction you fail to see is the one between the Interbank market (inter meaning between by the way), and a market maker institution feeding their own quotes into a liquidity provider for a retail broker.
A forex broker is not a bank, nor does it qualify to trade on the required individual volumes.

One last try: http://www.investopedia.com/articles.../interbank.asp

Let me save you the time with the key points:

The minimum transaction size of each unit that can be dealt on either platform tends to one million of the base currency. The average one-ticket transaction size tends to five million of the base currency. This is why individual investors can't access the interbank market - what would be an extremely large trading amount (remember this is unleveraged) is the bare minimum quote that banks are willing to give - and this is only for clients that trade between $10 million and $100 million and just need to clear up some loose change on their books. (To learn more, see Wading Into The Currency Market.)
Conclusion
Individual clients then rely on online market makers for pricing. The forex brokers use their own capital to gain credit with the banks that trade on the interbank market. The more well capitalized the market makers, the more credit relationships they can establish and the more competitive pricing they can access for themselves as well as their clients. This also means that when markets are volatile, the banks are more obligated to give their good clients continuously competitive pricing. Therefore, if a forex retail broker is not well capitalized, how they can access more competitive pricing than a well capitalized market maker remains questionable. The structure of the market makes it extremely difficult for this to be the case.


Read more: The Foreign Exchange Interbank Market | Investopedia http://www.investopedia.com/articles...#ixzz3x6fwDe21
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Wealth comes from what you keep, not what you earn
  • #443
  • Jan 13, 2016 1:20am Jan 13, 2016 1:20am
Quoting Rag2RichesFX
{quote} "Now, that said, the broker may take the aggregate positions of all of us guppies and put that on the actual market." Bingo. Brokers aren't in the business of speculating against their clients. They want risk free returns, IE, spread markup/commissions
omg, you ARE serious.

No. Just... NO! Please, just stop now.

Listen to that very faint voice in your head that whispers "you are wronggggg. You... are... wrongggggg." because it's correct.
Congratulations ScalaFX for coming out of the closet!
  • #444
  • Jan 13, 2016 1:25am Jan 13, 2016 1:25am
Quoting Rag2RichesFX
{quote} Brokers aren't in the business of speculating against their clients. They want risk free returns, IE, spread markup/commissions
Yep...that seals it. Absolutely delusional.
Wealth comes from what you keep, not what you earn
  • #445
  • Jan 13, 2016 1:38am Jan 13, 2016 1:38am
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Be hopeful in a winning position, and fearful in a losing position.
  • #446
  • Edited 1:51am Jan 13, 2016 1:40am | Edited 1:51am
No counterparty ONLY if the bank oversees the account.

So if I was with Citibank retail FX, Citibank is the only bank that can't fill the other side of my trade.

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Be hopeful in a winning position, and fearful in a losing position.
  • #447
  • Jan 13, 2016 1:44am Jan 13, 2016 1:44am
In Oanda's terms of service they clearly state that they "may" enter into back to back trades. They are allowed to hedge your position.

When you enter into a foreign currency contract with OANDA, you will be entering into a privately negotiated contract with OANDA, as principal. OANDA may, in turn, enter into "back-to-back" transactions with others. OANDA includes its mark-up in the price it quotes to you. These foreign currency contracts are not executed on an exchange and are not cleared on a central clearing organization. They are obligations of OANDA and you will not be afforded the regulatory and financial protections offered by exchange-traded contracts. Both you and OANDA are obliged to perform their respective obligations under each transaction in accordance with its terms. The terms of each foreign currency contract are set out in OANDA's Customer Agreement, which applies to every transaction you enter into with OANDA.
Wealth comes from what you keep, not what you earn
  • #448
  • Jan 13, 2016 1:46am Jan 13, 2016 1:46am
Quoting nubcake
{quote} omg, you ARE serious. No. Just... NO! Please, just stop now. Listen to that very faint voice in your head that whispers "you are wronggggg. You... are... wrongggggg." because it's correct.
Wait, nubs, wait.

I am a peacemaker, and I am trying to get the Congress on this thread to come to a consensus.

Rags did not read my next sentence....But we are not really a part of that.

Rags, I like your ambition, but you did read my post all the way I hope.

We are not a part of anything near the interbank. The broker might be, but we most certainly are not. Nubs is a blunt fella, but he is telling you right here. We are not part the interbank market.

We are minnows.

We are Gilligan.

We are Steve Urkel.

We are the gnats on a Rhinos back.

We do not matter one whit.

That said, it does not mean we cannot live well in FX. It means that we will never control policy or anything like that.
If you are good at something, never do it for free--Joker
  • #449
  • Jan 13, 2016 1:52am Jan 13, 2016 1:52am
Quoting nubcake
{quote} omg, you ARE serious. No. Just... NO! Please, just stop now. Listen to that very faint voice in your head that whispers "you are wronggggg. You... are... wrongggggg." because it's correct.
So you actually think brokers speculate against their client despite it being illegal?

. Whatever man
Be hopeful in a winning position, and fearful in a losing position.
  • #450
  • Jan 13, 2016 1:55am Jan 13, 2016 1:55am
You must be dense if you think banks don't want any of our liquidity. Especially since most retail are very inaccurate with their trades and provide liquidity in the places that the banks actually want it.

I'm not saying it's a lot, but it's still 200 billion ++ a day that retail provides.
Be hopeful in a winning position, and fearful in a losing position.
  • #451
  • Jan 13, 2016 1:59am Jan 13, 2016 1:59am
Quoting Rag2RichesFX
You must be dense if you think banks don't want any of our liquidity. Especially since most retail are very inaccurate with their trades and provide liquidity in the places that the banks actually want it. I'm not saying it's a lot, but it's still 200 billion ++ a day that retail provides.
Link, please.
If you are good at something, never do it for free--Joker
  • #452
  • Jan 13, 2016 2:02am Jan 13, 2016 2:02am
Quoting trader34
Do you see the words "artificial liquidity" anywhere? The distinction you fail to see is the one between the Interbank market (inter meaning between by the way), and a market maker institution feeding their own quotes into a liquidity provider for a retail broker. A forex broker is not a bank, nor does it qualify to trade on the required individual volumes. One last try: http://www.investopedia.com/articles.../interbank.asp Let me save you the time with the key points: The minimum transaction size of each unit that can be dealt...
ill read through your links

interbank by by definition does mean between the banks, yes

but who do you think brokers buy from? the banks.

and who are they buying for? retail traders.

therefore, what conclusion can you draw from that? interbank liquidity DOES matter to retail
Be hopeful in a winning position, and fearful in a losing position.
  • #453
  • Jan 13, 2016 2:35am Jan 13, 2016 2:35am
Quoting Rag2RichesFX
{quote} ill read through your links interbank by by definition does mean between the banks, yes but who do you think brokers buy from? the banks. and who are they buying for? retail traders. therefore, what conclusion can you draw from that? interbank liquidity DOES matter to retail

Your original assertion was that retail orders are put through to the interbank market. Hopefully you've come to see this isn't true.

To be term specific, brokers don't buy from banks.
They use their capitalization to obtain a line of credit from a market maker/LP, or multiple ones (look up the prime brokerage model for more information on LP bridging and aggregation).
That line of credit dictates how good their price feed is, which is then filtered down to us minnows.

We receive quotes from the market makers who then fill (or not) our orders through whichever platform we use.
This is not the interbank market.

This definition is not mine, but I'm not going to link it, because it is from a commercial member. I have no desire to boost sales for them!
But, his definition is good:
Branching off of this second tier is the third tier retail market. When brokers like Oanda, Forex.com, FXCM, etc. desire to establish a retail operation the first thing they need is a liquidity provider. Nine in ten of these brokers will sign an agreement with just one bank. This bank will agree to provide liquidity if and only if they can hedge it on EBS inclusive of their desired spread. Because the volume will be significantly higher a single bank patron will transact, the spreads will be much more competitive. By no means should it be expected these tier 3 providers will be quoted precisely what exists on the Interbank. Remember the bank is in the business of collecting spreads and no agreement is going to suspend that priority.
An ECN operates similar to a Tier 2 bank, but still exists on the third tier. An ECN will generally establish agreements with several tier 2 banks for liquidity. However instead of matching orders internally, it will just pass through the quotes from the banks, as is, to be traded on. It’s sort of an EBS for little guys. There are many advantages to the model, but it is still not the Interbank. The banks are going to make their spread or their not go to waste their time. Depending on the bank this will take the form of price shading or widened spreads depending on market conditions. The ECN, for its trouble, collects a commission on each transaction.


Interbank liquidity, that is the transactions occurring at the interbank level have no bearing on our retail trades. That is down to the individual market maker off track. All we see is the aggregated quotes from our LP's which are loosely based on the interbank pricing.

Now, as to us mattering? No, not really. We only provide a tiny portion of business to the banks.
The only ones who really benefit from our participation are retail brokers.
Wealth comes from what you keep, not what you earn
  • #454
  • Jan 13, 2016 2:41am Jan 13, 2016 2:41am
Quoting jmn5611
{quote} Link, please.
This was in 2013

I just said 200 billion ++ as a lowball figure
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Be hopeful in a winning position, and fearful in a losing position.
  • #455
  • Jan 13, 2016 2:49am Jan 13, 2016 2:49am
To be taken with a huge pinch of salt, as it's likely impossible to precisely calculate, and it also doesn't specify how leveraged transactions feature in overall volume.
But, this is their estimation:
https://leaprate.com/tools/retailvolumeindex/
Wealth comes from what you keep, not what you earn
  • #456
  • Jan 13, 2016 2:50am Jan 13, 2016 2:50am
Quoting Rag2RichesFX
{quote} I do appreciate the extra information. Perhaps you misunderstood what I was inferring. What I meant is that in effect our orders matter to the "true" market. The retail broker takes the opposite side of our trade, then immediately flips that trade to the LP which flips it to the bank to offset the risk. So while we aren't directly interacting with the banks, the middle men are in effect doing it with us.
NOOOOOOoooooOOoooOOOOllllleeeeeoooooooOOOoooo.

No.

The broker doesn't necessarily do a goddamn thing. Although you are attempting a soft retreat you are still dearly holding onto this notion that you've said something that has validity when you have not. Just admit it and get on with your life - you'll be doing everyone a favor. Stop trying to back-peddle, or prove a falsehood.

Just stop. Fucking PLEASE just stop. You have repeatedly asserted that retail traders matter. They do NOT. Never did and never will. The market existed before retail traders ever existed. STOP.
Congratulations ScalaFX for coming out of the closet!
  • #457
  • Jan 13, 2016 2:53am Jan 13, 2016 2:53am
Quoting trader34
{quote} Your original assertion was that retail orders are put through to the interbank market. Hopefully you've come to see this isn't true. To be term specific, brokers don't buy from banks. They use their capitalization to obtain a line of credit from a market maker/LP, or multiple ones (look up the prime brokerage model for more information on LP bridging and aggregation). That line of credit dictates how good their price feed is, which is then filtered down to us minnows. We receive quotes from the market makers who then fill (or not) our orders...
I do appreciate the extra information. Perhaps you misunderstood what I was inferring.
What I meant is that in effect our orders matter to the "true" market. The retail broker takes the opposite side of our trade, then immediately flips that trade to the LP which flips it to the bank to offset the risk. So while we aren't directly interacting with the banks, the middle men are in effect doing it for us.

If this wasn't the case, where is my profit coming from? It's certainly not coming from broker speculating against me and losing. It's coming from other speculative traders. The traders in which the broker passes my order onto, or the LP passing the order onto the bank.

By the way Reuters and EBS only do 230 billion a day in combined volume.
They disclose the exact amounts at the end of every month.
Be hopeful in a winning position, and fearful in a losing position.
  • #458
  • Jan 13, 2016 2:55am Jan 13, 2016 2:55am
Quoting nubcake
{quote} NOOOOOOoooooOOoooOOOOllllleeeeeoooooooOOOoooo. No. The broker doesn't necessarily do a goddamn thing. Although you are attempting a soft retreat you are still dearly holding onto this notion that you've said something that has validity when you have not. Just admit it and get on with your life - you'll be doing everyone a favor. Stop trying to back-peddle, or prove a falsehood. Just stop. Fucking PLEASE just stop. You have repeatedly asserted that retail traders matter. They do NOT. Never did and never will. The market existed before retail...
They dont "matter" as in the market would be illiquid without them. But they are 5% of the market. So it kinda does matter.

Im not trying to back-peddle. I stand by what I said. In effect, our orders are interacting with theirs, even though we don't do it directly.

What are you 12 years old? Hint: Act more mature/civil, it will give you more credibility.
Be hopeful in a winning position, and fearful in a losing position.
  • #459
  • Jan 13, 2016 3:04am Jan 13, 2016 3:04am
Quoting trader34
To be taken with a huge pinch of salt, as it's likely impossible to precisely calculate, and it also doesn't specify how leveraged transactions feature in overall volume. But, this is their estimation: https://leaprate.com/tools/retailvolumeindex/
Interesting. The BIS will probably put out total volume data this year in April.

5.3 trillion April 2010 to April 2013

My money is on 6.5-7 trillion a day for April 2013 to April 2016
Be hopeful in a winning position, and fearful in a losing position.
  • #460
  • Jan 13, 2016 3:10am Jan 13, 2016 3:10am
Quoting Rag2RichesFX
{quote} They dont "matter" as in the market would be illiquid without them. But they are 5% of the market. So it kinda does matter. Im not trying to back-peddle. I stand by what I said. In effect, our orders are interacting with theirs, even though we don't do it directly. What are you 12 years old? Hint: Act more mature/civil, it will give you more credibility.
You aren't in a position to speak of credibility.
Congratulations ScalaFX for coming out of the closet!
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