Hi guys,
I have read that those who provide micro lots are not really ECN or that the provision of micro lots is one of the indicators that it is not an ECN.
1} Why is this ?
2} For someone to be true ECN, should they be exclusively standard lot only ? Or can it be that their “micro lot also” account is a Non ECN and their “standard lot only” account is a true ECN ?
3} Please let me know those standard lot only ECN providers.
Thank you
What you have read is incorrect.
There [I][B]are[/B][/I] brokers who offer ECN accounts in which the minimum trade size is one micro-lot.
Here is a good one — ECN Forex Trading by Best ECN MT4 Forex Brokers with ECN Forex Trading Platform - Trader's Way
There are others.
.
I think micro lot is way lower that is traded on interbank market. I guess there are some lower-tier pools of traders like you or broker acts as a market maker.
Hey Clint, Just opened Demo mt4 there, i love the spreads, might be the edge i need to be a tad more with the dogs. Any insight on Spread widening? I will research anyways, but wanted to maybe hear about it first hand or heard about,…
What you’ve read is not entirely incorrect. Offering microlots (together with high leverage and accepting small deposits) may indeed be indicators that a broker is not a true ECN broker. First of all, major liquidity providers do not support microlot trading and the minimum supported lot size is 0.1 (1 minilot) which is one of the main reasons retail forex brokers keep trades less than 1 minilot in-house and act as counterparties to said trades. By definition then they are also market makers - despite their claims to the contrary.
As to why high leverage may be another indicator read:[B] Can a true STP/ECN broker realistically offer 500:1 leverage?[/B]
Now as far as Tradersway is concerned I’ve in fact contacted them and pointed out the above and also (politely) questioned their claim that with them microlot traders have direct access to the interbank market. The following is their response: [I]
Yes, this was true previously but there have been a number of improvements in the Retail FX markets - one of them being increased availability of liquidity providers allowing microlots. Many of the larger LPs still do not offer microlot trading, however we have approximately 30 with whom we work. When you place a trade [B]it is likely[/B] to be routed to a different liquidity provider than your previous one.
[/I][I]In the US, FXCM is a full STP broker offering the very same services as us. They offer microlots too[/I]. (emphasis added)
[B]
However, [/B]despite the apparent “increased availability of liquidity providers allowing microlots” Tradersway’s Customer Agreement states:
[I]
…The following are examples of such material interests and conflicts[/I][I] of interests:
[/I][I]a. The Company may effect or arrange for the effecting of a Bet with you on your behalf in connection with which the Company, the Company’s Associated Companies may have other direct or indirect material interests…
b.The Company may execute hedging transactions prior to (i.e. in anticipation of) or following receipt from you of a request, or information concerning a contemplated request, to open or close a Bet in order to manage the Company’s risk in relation to Bet(s) you are entering into or contemplating, all of which may impact on the price you pay or receive in relation to such Bet(s) and any profits generated by such hedging may be retained by the Company or an Associated Company without reference to you…
[/I][I]e.[B]The Company may make a market in Bets which you enter into under this Customer Agreement…[/B][/I]
And herein lies the problem. With any mention of “conflict of interest” together with the fact that a broker (in this case, Tradersway) may in effect act as a counterparty to your trades, you can safely assume that they are not a “true” ECN broker.
Also FXCM clearly points out under Execution Risks[I]
…Dealing Desk execution and trading is not conducted on an exchange. FXCM is acting as a counterparty in these transactions and, therefore, acts as the buyer when you sell and the seller when you buy. As a result, FXCM’s interests may be in conflict with yours. Unless otherwise specified in your written agreement or other written documents FXCM establishes the prices at which it offers to trade with you. The prices FXCM offers might not be the best prices available and FXCM may offer different prices to different clients. If FXCM elects not to cover its own trading exposure, then you should be aware that FXCM may make more money if the market goes against you…
[/I]
In light of the above we can infer that both Tradersway, FXCM and in fact the vast majority of ECN brokers adopt a hybrid brokerage model. In other words they offer certain traders (usually the profitable ones) direct access to the interbank market -they act as an intermediary - while acting as a counterparty to others (those who suck).
The reasoning is simple: They keep the net losers’ trades in-house, trade against them and make a lot more money in the process while sending the trades of profitable traders to the open market (revenue earned from spread markup/commission) and mitigate their risk. Because, when they trade against you i.e act as counterparty to your trades, their profit is your loss and your profit is their loss. Hence trading against a profitable trader wouldn’t make any sense.
This is of course no crime but claiming to be “true” ECN brokers would be false.
Interesting stuff Shinshiro, Thank you for your post.
I was just coming to this thread inlight of TradersWay, because I love it thus far, compared anyways to Oanda.
Just the spread is awesome to me, lol… Just have to get used to the commission charge, which i have figured out. Also, its going to MAKE me trade less, and let my trades run more. Because at this point with the commissions, fewer is better, am I right?
Im new to all this part, lol…
Im probably going to deposit, and kick O and A to the side. As a scalper type trader, the spread is a huge factor. Just never really looked deep into the broker thing because Oanda was a good practice platform, orrrrrrr was it?!
Anyways, Here is my situation. My goal is profiting Millions. Would tradersway be a good footing to gain in? What would be the max I would want to run thru their mills? Then, where would I want to go from there?
Im just pickin your brain is all. Getting the ducks lined up properly at this point.
I have major goals, and I know for a fact, O and A wont get me there on the brokers side of the business.
Thanks for your input, and If you have no input for the top post, *Shruggs, no problem, I dont expect you to know, but, you just might, lol…
Thanks
I would also like to know if TradersWay is a good direction to go?
As for OANDA I wouldn’t go near them at all due to their mass spread abuse which surprisingly goes unnoticed.
I made a post about this below, take a look as I caught the spreads jumping 11-20 pips to hit my stop loss and to trigger “safe” trades set in place which resulted in them becoming losing trades.
http://forums.babypips.com/newbie-island/84030-oanda-chart-spread-confused.html
EDIT: Just noticed you actually posted in this thread lol
Regards,
Steven
I think it’s only recent, Steven (I traded there for a long time without [I]ever[/I] seeing an instance of what you’ve commented on here), but it certainly looks like you’ve done the forum a service by recording it here, and you’re not alone in mentioning it recently, either.
Check out this pic. The Oanda Spread was actually 20 pips for a while before I started to log the history of the spread. This is GBPUSD this evening, 5M chart
While I won’t speak for other brokers, your interpretation of how FXCM executes client orders on our No Dealing Desk (NDD) model is incorrect.
The NDD execution we provide to all Standard accounts (5k minimum) and Active Trader accounts (25k minimum) is pure, not a hybrid. Each client order is offset one-for-one with the best prices from competing liquidity providers. Therefore, we do not profit from client losses or lose from client profits. Instead, we make our money from the commission.
Technically, you could consider the dealing desk (DD) execution we provide to Mini accounts as a hybrid, since FXCM can act as a dealer determining prices and spreads, but backup liquidity providers fill in when FXCM does not act as the dealer. The language you quoted from our terms refers to our DD model specifically, not our NDD model.
No, this is not my interpretation of how FXCM executes client orders on their NDD model. It is in fact my interpretation of your brokerage model . FXCM offers both NDD and DD execution models so it follows that FXCM employs a hybrid brokerage model. In other words, from what I understand, FXCM is both a market maker and STP broker.
The reason I drew attention to FXCM’s DD execution model (which by the way was in no way intended as a criticism) was purely due to the fact that Tradersway in their email response - as indicated in my previous post - stated, “…FXCM is a[B] full STP broker[/B] offering the very same services as us. They offer microlots too…” (emphasis added)
The implication was thus that both FXCM and Tradersway are “true” STP brokers offering microlot trading. But we know that this is not the case since both Tradersway and FXCM offer two execution models - one of which is the DD model whereby brokers act as counterparties to clients’ trades and in these instances FXCM and Tradersway are dealers/market makers.
I referenced your DD execution model for reasons noted above. And again I point out that the term “hybrid” describes your brokerage model not your execution models so I’m not disputing how your NDD execution model works.
A broker is said to employ a hybrid brokerage model when two distinct execution models are offered - as is the case with FXCM (NDD+DD = Hybrid). Logically, you cannot have a hybrid NDD or hybrid DD execution model - it’s either one or the other.
Thanks for clarifying, Shinshiro :57:
The key point I wanted to address for others is that while we provide DD execution for Mini accounts, the execution FXCM provides to all forex traders on Standard and Active Trader accounts is pure NDD where each client order is offset one-for-one with the best prices from competing liquidity providers, even for micro lots.
well, Ill tell ya what, Im depositing with TradersWay.
Its demo, but if its somewhat close, in real money, Im happy for the change from Oanda.
99 trades, 25 losses… In all the losses, NONE are more then 1 pip. All trades lost where from trailstopped short of commission charge. So, Not one single trade lost, but lost in terms of commission charges. And thats using just 1/5 of my margin per trade.
Up 15% this week,
Just having the steady spread made a world of different for my preference of trading.
