I’m trying to clear up/confirm a conceptual idea I have about price that is paramount to how I keep writing algorythms, understand what I believe drives price, and how I can use this idea to further my research etc.
I do not trade High Frequency or have access to micosecond data etc like a firm or a high frequency trader does. I do not need access to the data to confirm or bust a theory I have about price movement etc. That being said, if anyone here does have access to that data or has any knowledge about it, could you answer this question for me?
My question is, Do high frequency bots/traders trade the market at the same prices we retail, hedge, or instutional traders do? What I mean by this is… Can the EUR/USD be bought at 1.123456458 price and be sold at the 1.123456459 price? Or is the market limited, even to High frequecy traders to an even price that rounds to the fraction of a pip 1.123456? Does the Currency exchange iteself only quote price to the 6th decimal place? Price is either infinite, just like π(pie), or it is rounded impure and finite (which is what we see on our charts, smart phones, news papers etc.). Infinite makes more sense to me, but if we are only able to trade it (despite speed) in a finite manor, than price is more easily manipulated and controlled than most previously may have beleived. Moving on from that, if it is finite, the Volume we are quoted in tics, assuming its true, retains more value to me than the volume in tics we are given if others are able to trade at prices we have no access to (that volume is not measured by our retail brokers). Hope that makes sense.
This information is important to me for multiple reasons, but I need not get into that yet. If anyone has the answer to this information and is verifiable, or if their response is logical, I would love to hear what you have to say. Thank you in advance.
The theoretical division of units since decimalization is infinite, but the trouble is finding a trading partner to trade at that same division. If there are parties that have the tech to trade at smaller divisions than you or me, then they can only trade with one another and it doesn’t matter to us anyway.
The famous saying about picking up pennies in front of a steam roller cannot be overstated here. The big bucks are not made one millionth of a penny at a time, they are made when prices move in big swings, in trends.
Thank you for your response, I need time to think to respond to many of your points. But from my understanding, the answer is yes to my question? High frequency traders have access to smaller denominations of price?
Yes I think so. Many market makers in FX live on the spread and some of them let it fluctuate and make them profits in the fluctuations that are a tenth of a pip or less.
That being said, does it not mean volume given to retail traders is utter bs? If volume measures change in price quoted in ‘tics’ and the major players are trading on intervals much less than a ‘tic’… the volume we are given is utterly useless due to the fact that it doesn’t even record changes caused by the big players? After all we can both agree me you and every member of baby pips has no real measurable impact on price correct?
I doubt any individual retail fx traders have any effect on price. But I doubt any one major financial institution besides an issuing central bank has much effect on exchange rates outside of just minutes or perhaps hours.
I don’t know if this has become broad practice, but I know Thomson Reuters a few years ago decided go limit the price increments on it’s dealing platform to I believe pipettes (10ths of a pip) in order to reduce the influence of HFT algos on their system.
Does the Currency exchange iteself only quote price to the 6th decimal place? Price is either infinite, just like π(pie), or it is rounded impure and finite (which is what we see on our charts, smart phones, news papers etc.).
There is no “Currency exchange”. Forex is a dealer-based over-the-counter market with no single centralized exchange.
Moving on from that, if it is finite, the Volume we are quoted in tics, assuming its true, retains more value to me than the volume in tics we are given if others are able to trade at prices we have no access to (that volume is not measured by our retail brokers).
Keep in mind that in terms of real volume, the vast majority of that is happening outside the retail space. Since price changes, however, tend to flow down from the inter-bank market to the retail one, it may be that tick volume is fairly representative (this has been discussed elsewhere).