Slippage with ECN broker

Broker Discussion Forex Brokers
1

Hi all

I have a live account with IC markets, this is my first ECN broker, was with Oanda previously. My frustration with IC markets is that the slippage is really bad, usually 0.3-0.6 pips on entry(i usually enter with stop entries), and if I am stopped out there might be another 0.3-0.6 pips of slippage. Total slippage for a trade that I lose would be anything from 0.2 to 1.0 pips. My worst ever experience was 2.4 pips slippage on entry, and 0.5 pips on being stopped out on the same trade, for a total of 2.9 pips on one single trade! I do not even trade large lots, and i only trade the european and U.S sessions, never during news announcements. Usually on the occasions that I do enter with limit orders, the best positive slippage I ever got was 0.1 pip. However positive slippage on limit entries are few and far between. The thing about slippage is that it is supposed to work both ways, but on my take profit(limit) orders, I cannot recall even once when I got positive slippage.

I moved away from Oanda due to their high spreads(compared to IC markets) and other reasons which I will not highlight here, but the constant slippage with IC markets is negating the lower spreads they offer. Very often with slippage from IC markets I end up paying more than the spread I would pay with Oanda(1.3-1.7 on eurusd), if I factor i8n the commission that I have to pay with IC markets.

I do not know a lot about ecn brokers, except that they source their liquidity from major banks and fill their customers orders purely upon the best price quoted by their liquidity providers. So in theory, the more liquidity providers a broker source their prices from, the more liquidity they have, and the higher the chance that their traders get filled at or close to a price that they keyed in. At least that is what I think. So with my bad slippages with IC markets that happen very often, would it be that they do not have enough liquidity providers? Again I stress that I have limited knowledge about ecn brokers thus if anyone has more information please let me know, so that everyone here might have a better idea on how ecn brokers work.

So I would like to ask my fellow forumers who have experience with ecn brokers (1) how often do you get negative slippage, and on average how many pips on the same trade? (2) Is there an ecn broker where slippage does not occur as often? Better still, would you recommend your ecn broker to me based on your own experiences?

I welcome any comments, thanks!

2

Depending on what country you’re from, I can recommend dukascopy as they let you specify maximum slippage on buy/sell stop orders (but you might not get filled).

Another solution, is that when you want to “buy” (at market or buy stop) set a buy limit half a pip below the price. Very rarely (very!) will price move straight into profit from your entry and never return. But 0.5-1.0 pips slippage I’d think is wide for their ECN?

I’m currently using IC Markets Raw/Pro MT4 and the slippage is never above 0.3-0.4? Ask them also, they might be able to help out.

3

Thanks for your reply! I too think the slippage I encountered is pretty wide that’s why I am raising this issue here. I have resorted to watch the bid ask prices like a hawk just to make sure that the slippage I encounter is above board. Say for example I keyed in an order to short eurusd at 1.09715, I have really seen the bid price jump straight from 1.09716(when my order would not have been triggered) to 1.09710, which means my order is triggered and I get 0.5 pips negative slippage. So I am thinking, is there no liquidity provider quoting between 1.09714-1.09711? IC markets claim to have many different liquidity providers, and I only trade during normal market conditions, thus I don’t know if the wide slippage I encounter so frequently only happens to me or to someone else also.

I have raised the issue of slippage with ic markets before and of course they give the usual reasons/excuses like they route all orders to the interbank market/they don’t control the price feeds/slippage is normal with stop entry orders. Funny thing is when I ask them why I never get positive slippage on my limit orders, they could not provide me with an answer.

I see you are from Perth, so I wonder if location would be an issue. My broadband connection is not the fastest (about 25 mbps download and 1 mbps upload), that might be an issue too. However I saw that IC markets claim that they have servers in new york and London, and I am moving to the UK soon, so I would probably keep my account with them at least for a few months while I am in the UK to see if this issue with slippage persists.

As for Dukascopy, I have done some research on them and might start an account with Dukascopy Europe once I get to the UK. Thanks for the suggestion and for your reply!!

4

It’s not the speed of your connection that matters, but the distance between your computer and the broker (well, and the distance between the broker and the liquidity provider). If you are too far away it might happen, that by the time you see the price on your screen the volume behind that price is long gone.

The good thing about Dukascopy is that they show you the depth of the market. I stopped using them because the spreads were far below average, but I remember that the volume behind the best price was usually just a few million or even less.

And given that all the large liquidity providers are included in almost every price feed, you are competing with all the other traders in the world and many of them have a faster connection to the liquidity.

You might want to take a look at LMAX when you get to the UK.

6

For some reason, after i started this thread, my slippages on ic mkts decreased drastically, and on my trades for the last week, i got little or no slippage on both entries or exit. Hmmm…

Anyway i decided not to be at the mercy of just one broker, so I did some research and started an account with hotforex. I have not funded it yet(they do offer to return any bank charges you incur for wiring funds to your account, which is great) but i have pulled up the mt4 charts and looked at the spreads for eurusd. And i do see negative spreads pretty often, where the bid price is higher than the ask price. I never see this at ic mkts. And I chanced upon this article from the following website:

https://www.cashbackforex.com/en-us/school/tabid/426/ID/437468/finding-a-reliably-fast-and-honest-broker

“he quality and speed of execution can vary between STP/ECN brokers depending on two factors: 1) the depth of the liquidity pool; and 2) the sophistication of the bridge technology. The greater the number and diversity of liquidity providers (whether in the form of contracted LPs or anonymous LPs forming an ECN pool) the easier it is for the bridge technology to stream in, at any given moment, the best bid from one provider and the best ask from another. But not all software bridge technologies are created equal. Some are far more sophisticated than others in hunting for (and streaming in) the best bid from one LP and the best ask from another LP. I have been witness to software that can so quickly and intelligently differentiate and grab the best bid from one LP and ask from another LP that the resulting spread is frequently negative. Yes, you read that correct, negative!–for instance, the EURUSD bid steams in at 1.26436 and at the same moment the ask steams in lower at 1.26432 (result: -0.4 pip spread), instead of how we see it, as a bid streaming in at 1.26436 and at the same moment a higher ask of 1.26448 (result: 1.2 pip spread). Oh, I wish I had access to such expensive software to make spread-free trades; I would make a mint :)”

" Any STP/ECN broker can use, with perhaps a lighter touch than their MM-broker counterparts, the virtual dealer plugin to create a predetermined delay, if even only for a second, causing you be slipped by a 0.2 pips or so, which is additional profit for them (particularly if they take what should be your profitable slippage and only deliver back to you the negative slippage). Another thought: if the STP/ECN bridging software is rather slow, it works in the broker’s favor and there might be little incentive to make it any quicker : in the interim between when the client executes the market order and when it can be offset by a liquidity provider, prices do change (for better or worse), and if the price moves in the client’s favor (positive slippage), the broker can quote at the client’s tagged price (and pocket the better price), and if the price moves against the client, the broker can quote at the worst price. This is what the NFA discovered about FXCM (see Slippage Cheater #2 below): FXCM stole their client’s positive slippage and they failed to upgrade their electronic software to make it any faster. The greater the software delay, the more potential for slippage, positive and negative, and thus more profit for the broker who wants to steal the positive slippage."

I am not saying that ic mkts in anyway did anything honest before, nor am i suggesting that they will, but the above info, to me, might or might not be one of the reasons why i got so much slippage before. i have not done any trades with hotforex yet, but at least my experience with them so far is much better than that i had with ic mkts. So i might just close my current account and go entirely to hotforex.

7

Carra, great info.

Refer to my past thread on the same topic
my-broker-mt4-my-charting-software-showing-me-two-different-things.html

I would like to reveal that this broker is IC markets. I am very disappointed.

8

there are some pretty interesting threads about IC markets at forex peace army, might be worth reading, some scary stuff

9

I took a look at your charts but the numbers were too small so I didn’t really understand what was the problem, is it that you calculated that your take profit would have given a certain $$ amt in terms of profit, and the actual amt shown in your acct is less? And you are saying that this is due to negative slippage right? I have pointed out in my first post that I never got any positive slippage on my take profit(limit) orders, though by their very nature, when price is going quickly in the direction of my trade, there should be a bigger chance of positive slippage, the very same reason why entering via stop orders would be more prone to negative slippage. However when I asked ic mkts why I never got any positive slippage on my take profit orders, the reply was “I cannot say why you never got any positive slippage” (the exact words from the guy who replied). From then I was suspicious, but I could never explain why, until I read the article from the link that I posted. I must say though that I have never encountered negative slippage on take profit orders with ic mkts.

To be honest I think if you feel you have been short changed, go kick up a big fuss and see what they say. If you press your point hard enough and if ic mkt feel that the heat is on them, they might resolve the issue in your favor. Like I mentioned before, somehow after I started this thread, my negative slippages have drastically reduced. I don’t know if it is a coincidence, but honestly my faith in ic mkts have been severely shaken.

If anyone reading this thread has any issues that you encounter with ic mkts, please voice it out and do not suffer in silence!!

10

I read some of them, and I saw a person posting her complaints about ic mkts, saying how she was so unhappy with ic mkts, then she started an account with hotforex and was so much happier, that did a lot for me in making the decision to open an account with hotforex.

11

Carra , their charts were off by one pip.

I tried to measure with oanda and hot fx, both oanda and hot fx gave me the same charts while IC markets is still giving me ONE PIP, One pip difference from my charting software trading view.

12

I do have hotforex and ic mkts mt4 open at the same time, and I also notice some difference between their prices, but the same difference applies to both the bid and ask side, say ic mkts eurusd 1.12005-1.12008, hotforex might be 1.12008-1.12011, the difference at anytime might be 0.3 to 0.6 pips. I also have oanda prices on at the same time. However because oanda’s prices have the spread of 1.5 to 1.7 built into them, their prices always encompasses, or envelops the prices of both hotforex and ic mkts. Thus at the same time, Oanda prices might be 1.12000-1.12015. I have never seen the prices between hotforex and ic mkts differ by up to 1 pip. As I am typing this, the difference bet. the prices is less than 0.1 pip.

13

Slippage is par for course my friend. I too traded with IC Markets. Slippage is cause effect steaming from the fact that we don’t actually trade the market. The difference between an ECN/STP broker and a dealing desk is nothing other than who is going to take the opposite side of your trade. A MM will take the opposite side and has the ability to manipulate the price fèed. Since you trade ECN chances are I’ll be the one trading against you. And if you place a market order at 1.10 and I have a limit order at 1.0990 and mines the closest order then you will encounter a price slip of 10 pips. Thats how it works and there’s not much we can do about that. Of cause there are other factors. Latency is a big one. Companies will spend 10’s of million of $$$ just to save 10 ms of latency. The time it takes you to click buy til the time your order reaches the market. Volitility and liquidity also plays a big part. But I think the big thing to remember is that we trade against each other. The market sets the price.

14

I understand that slippage is unavoidable if we are trading in a true ecn environment. That part I can accept. Even if I trade with hotforex or any other ecn broker, I am not expecting that I would not encounter negative slippage anymore. However my axe to grind with ic mkts is that I only get negative slippage, but never positive slippage on my take profit orders. I sent a few emails to them asking why that is the case and got the non-committal answer “I cannot tell you why you never got positive slippage”. So the article that I had put a link to in one of my earlier posts gives a reasonable answer why that might be the case i.e. the broker using a plug-in to allow negative slippage, but keep the positive slippage for themselves. Of course I cannot prove it, and thus I cannot come out and accuse ic mkts of using this plug in, but I have done enough trades with them to allow any probability to play out, and I’ve had enough take profit orders executed at exactly my limit price and no better, to say that I would probably never expect to get positive slippage from this company. Now if you suspect that the broker you are trading with is only allowing negative slippage against you, but never allows positive slippage for you, would you continue trading with this broker?

Sorry I sound defensive and argumentative, I am just trying to bring my point across, hope you don’t take offence.

15

I’m interested in this because of a) how I trade and b) IC Markets are my broker. Your experience is in reality opposite to mine but then I would say I have never focused on whether I get positive or negative slip. And things like latency, volitility, liquidity and slippage have much more effect on me. Im a hybrid scalper. I do believe there is a script to measure slippage but I wouldn’t know where to find it.

In Aus I think we are blessed with our brokers. I just don’t think it’s in their interest to manipulate the price feed. The income from comm charges is huge. But what goes on back of house we’ll never know. It would be interesting to hear some other experiences particularly if the same issues arrive with cTrader. I’m seriously thinking of changing platforms but cTrader only has up to a 34 tick chart. Currently I use a 70. So that’s an issue.

16

Hi bobbi, could you post a ctrader quote and match up with a trading software? Maybe their ctraders have a slightly more accurate chart. I hope it turns out fine.

I felt more confident with an ECN but it doesnt really seem like an ECN to me frankly speaking.

17

Thanks for sharing your experience with ic mkts. It is good that you share a different experience than mine so I know that it is possible that some traders have no issues with slippage. Hopefully you will never experience as much negative slippage as I did!

18

Unfortunately not this week my friend. Im away on work duties but will do this weekend. Check this thread 301 Moved Permanently There is differences between quotes on cTrader and MT4. And any other charting software. And any other broker. It comes down to their liquidity provider and data filtering. Things that are way out of our control. We accept that and move on. One thing I like to remember about forex is that 95% of the hype out there is marketing. Nothing more and nothing less. This industry is huge and there is a lot of competition out there. They all want our dollars. And the greatest trick (I said this somewhere else recently) they every played was to make us believe we trade the markets. We dont. By now we all know dealing desks used to take the opposite side of you trade. And the tricks they used. Today the catch cry is ECN. Come trade with us we have access to the 50 dark pool liquidity providers giving you the best price, lowest spreads, fastest exacutions speeds. Thats marketing. Reality is ECN is just a trade matching service. If my long trade matches your short trade bang our order is filled. And your broker and my broker get fat of the commissions. Its a beautiful model. Brokers now don’t run the risk of having to take the opposite side of the trade.

I have no doubts but ECN brokers still run their A and B books. Why not add some more icing on the cake. I would. When I first signed up with IC Markets I got my log in details. The data feed was terrible always dropping in and out. Then I started to win a few. 6 months later I got an email telling me my server is being changed. Now my data feed is never interrupted. Things that make you go mmm.

Oh I get negative slippage bro and it can be huge. I had a 20 pip slip on NFP last friday. Thats just the nature of the beast at the time I was trading. You have to remember that we are more prone to negative slip particularly if you are manually exiting a trade. After all the price is moving in the opposite direction trigger an exit.

19

It’s called assymetrical slippage, FXCM was fined for some mln. for that trick in 2010.

20

Maybe because they have 1 pip markup?

21

No mystery. Different brokers, different business models, different books, different “liquidity” providers, different data feeds, different data filter.