Greetings Pip Lovers,
Do any U.S. based traders have any experience with Oanda? I’m thinking of switching over. Wondering two things:
Any feedback would be greatly appreciated.
I’m not sure what happened but my withdrawal request (via paypal) is still pending since Aug 25. This is my first experience with Oanda since I started trading with them 5 years ago. Normally they will process the withdrawal request within the same business day.
They are not ECN/STP broker, but their execution is quite fast.
I am in the U.S. and I trade with Oanda. They are not an ECN at all. They are a market maker. My opinion about that is: Don’t believe the fear mongering, if you want an in depth discussion about the topic there are plenty of threads about it. I am not afraid of market makers and most of the people who are afraid of them are simply doing business with them unwittingly.
But none of that has anything to do with why Oanda IS SO GOOD. What is so good? If you trade using their fxtrade platform, the minimum lot size is a single currency unit. That is right, you can trade one euro and risk fractions of a penny on the trade. You can trade 1053 units, or 291 units. You can trade any size. With that, you can always put on the precise risk you want to put on and round to the penny.
Example: You want to buy EURUSD at 1.1700 with a stop at 1.1230. That is 470 pips in risk. If you buy 1,000 units, you will risk 10 cents per pip and thus risk $47.00. But imagine you want to risk $22.00. Well with Oanda you can keep that entry and stop level and simply put on 468 units to risk 4.68 cents per pip. You won’t have to round to the nearest minilot and end up putting on more or less risk than you would prefer. Because of this, Oanda is nice.
Oanda did give negative balance forgiveness to accounts affected by the SNB bomb drop last January.
-Adrian
Thanks for the feedback, Adrian. That is really good info. Can you expand briefly on why you believe market maker brokers are not deserving of all the cautionary tales you hear about them?
Dealers make money on transactions not trader earnings. So a trader that closes 2000 trades in a year is great for the dealer regardless of the profit or loss accumulated by the trader. The trader that closes two trades a year is not so great for the dealer. Some dealers even charge a “data fee” if a trader doesn’t conduct enough trades in a given period.
As a result of this, dealers push traders to do short term higher frequency trading or “scalping”. So there is naturally a lot of info out there about how to day trade or scalp or just about anything that promotes a higher frequency of trades. As a result of that, lots of people come into trading looking to scalp.
But there is a troublesome conflict of interests that arises here. Market makers are scalpers. Before the age of online trading, only market makers could scalp. But as internet trading started in the 90’s a mountain of retail traders rose up to try to eat the market makers’ lunches. What is seemingly forgotten is that trading in financial markets has existed for many many decades precisely because of market makers. Every trade on the NYSE for a hundred years was executed by a market maker known as a “specialist”. He simply traded both sides of the spread in a specific stock all day for teenies to create liquidity and allow for everyone else to trade. Today, not much has changed. The specialsts are now called “designated market makers”.
The only way a retail trader can be a successful scalper is to outscalp the market makers. But they are at a massive disadvantage against the market maker. They don’t have the information or the speed the market maker has. And online scalpers battle specialists for teenies on the NYSE for years without anyone ever villianizing the market makers.
But then came the advent of ECNs and STP dealers in forex. These new STP dealers needed a way to get people to do business with them rather than their competitors. So they created loads of marketing pushing people to scalp for teenies (because they want more transactions) and villianized the market makers (their competitors) to lure high frequency traders to their shop.
What the STP dealers don’t tell everyone is that they often forward your order to a market order. Or they admit this but tell you that this is better for you because the evil stop hunting market makers won’t know where your stops are until they are triggered because the STP dealer doesn’t reveal them to the market maker.
All this makes some since if you are trying to buy at the bid and sell at the ask and thus scalp for a teeny and rob a market maker somewhere. But it is meaningless if you have a wide stop and take trades that are setup to stay in a position for weeks at a time.
The market makers don’t take the other side of your trade and wait for you to close it at a loss so they can bag your loss. if you buy 1000 EUR/USD from a market maker he may cover his position a millisecond later with another retail trader just a pip lower than where he traded with you. He is flat and you and him are not trading against each other. Then, weeks later when you sell your position to him at a huge profit he sells it to another trader a millisecond later at a pip higher and that is his profit.
Scalpers say “my dealer took out my stop” the only way this is possible is if it is possible for him to do this profitably. This means there is little or no market between your stop and the current price action. He may actually prevent the market from hitting your stop because it is profitable for him to do so. That is how he makes his money. The mechanisms of this are evident if you simply run your mind through what the market maker must do to make money.
Have you ever seen the market dive to 1 pip from your stop then turn higher to your benefit? Why did the market maker not take you out? Because he can’t do so and make money. It was more profitable for him to buy a pip above your stop. He protected you. Not because he particularly wanted to but because it made him money to do so. Your stop was meaningless to him.
-Adrian
P.S. I am answering all this in the bar. I will read again in the morning and see if it makes sense.
My reply is a bit fragmented but it is OK. What is funny is that the market makers at the NYSE villianize electronic trading networks that bypass those market makers. They call those networks by the frightful ominous title of “dark pools”. And it is conventional “wisdom” in retail finance and in political circles that these “dark pools” are evil and secretive formats for the extremely wealthy to consolidate more wealth and not include the general public. But that view is nothing more than the victory of the equity market makers in instilling fear to promote their own value as operators of a “transparent exchange”.
FX dealers have done precisely the opposite in promoting a fear of market makers. They say that the lack of transparency in an electronic trading network without a designated market maker is good for the retail trader.
So ask yourself “Which is it? Are market makers to be avoided at all cost or are they our only hope to escape the evils of the scary dark pools?”
All of the fear mangering is simply manipulation. I pick on FXCM because they made a commercial depicting market makers as ski mask wearing thugs stealing money from a trading table. FXCM (I trade with them so understand I don’t have anything against them) says they execute your trades straight through an electronic network including ten major banks that provide liquidity to the network. Well guess what those banks are doing on that network, market making.
All a straight through processor does is forward your order to a pool where it may very well be executed by a market maker and the stp dealer then charges you a markup above the spread cost imposed by that market maker. This is precisely similar to a broker that forwards your order to the NYSE for a stock trade who passes the spread cost from the designated market maker on to the trader and adds an additional fee.
The fear mongering on this topic is hilarious and only has any effect because the nonsense is so widely circulated and believed. If market makers are evil, then trading any NYSE listed instrument is evil. Ha! Ridiculous!
Scalpers must beware of the market makers but only because market makers must beware of scalpers. All other traders should forget the whole nonsense.
-Adrian
I could be totally wrong, but recently i had Oanda were having withdrawal issues was that correct? although i have never traded with this broker, but heard about them fair bit.
Oanda is good, been with them for 5 years and never had any problems. Still have an account there.
No, i didn’t find OCO with Oanda, although i would really like that option…
Otherwise i am very happy with Oanda…especially the odd lot sizes are great for money management…
Adrian - thank you for your detailed responses. I think I can follow your train of thought. Fear is an effective marketing tool so I can see now how this may have contributed to the negative press about market-makers. Thank you for shedding some light on the subject - very informative indeed. As I am not scalping I will take your advice and not worry about it. Thank you.
Adrian, thanks for your posts. I am on a demo with OANDA and about to open a live account. I have come across a few posts that say it is difficult to get money out of your account at OANDA, but some of your reasons for using OANDA in your first post in this thread (small, odd lot sizes) are attractive to me, because as I go live, I am planning to start small. Just wanted to take a moment to say thanks for the information because it is timely for me… agcoast
You can find complaints about making withdrawals from pretty much every fx dealer. The reason is likely because of anti-money-laundering rules imposed by government agencies. The rules are that you cannot withdraw money that you did not deposit or win from trades. If you fund an fx account with a card the dealer will want to prevent you from making a withdrawal by any method other than refunding that card. If that card was lost and replaced there will be complications. That is just one example of the troubles that can result from these regulations. I doubt Oanda has any more trouble with it than any other dealer out there.
-Adrian