For GBP/USD, I’ve got hold of historic daily open, close, high, low and volume data for 15 brokers, some ECN, some MMs. All tuned in to bid price, most set for 5pm EST close and the variation in the quotes are shocking! I’ve seen differences of open of around 35 pips (yes pips not pipettes) and am struggling to understand why there is such a huge difference (even if you remove mondays from the picture). Can anyone shed any light?
Also, can someone confirm that the volume is the number of ticks for that broker … which would be consistent as to why each has a different volume number.
I can’t shed much light on the subject to he honest (remember I’m out here in South Africa and on my own i.e. I’m not at Head Office so I don’t know ‘whats what’) BUT I intend to find out myself because BELIEVE it or not: I read your post the other day and it’s been bugging me ever since. I’ve always been under the impression that with MetaTrader the same price quotes would all come from the same source e.g. EUR/USD. How wide the spread is and stuff like that obviously is determined by the broker (and of course it’s possible for ‘bucketshops’ to ‘pull dirty tricks’ too) but the data ITSELF should be the same. At least that what I thought. In other words: the only difference in the OHLC prices could be because of the time on which a particular broker closes their DAILY charts (which in turn would affect the 4-hour charts too but anything shorter than that should be the same logically speaking). But THEN (and as a part of another argument with someone on another thread about MetaTrader) I did an experiment with MetaTrader (basically to prove a point). I opened a chart of Bank of America. At this particular broker (it wasn’t Deltastock): there was a MOST DEFINITE data error on the chart i.e. there was a bar RIGHT at the bottom of the chart where the OHLC prices were EXACTLY the same and the OHLC prices were nowhere NEAR to where the stock was trading. In all probability: it was a ‘no trading day’ (so it shouldn’t have been there in the first place to be honest). The big problem was that with a bar like that sitting there: just about any and every indicator was rendered useless (because obviously this bar and it’s prices were being taken into account so even something as simple as MACD was thrown WAY ‘out of kilter’ because of this bar). Anyway: from within MetaTrader I edited (actually deleted) this bar. I then refreshed the chart and ‘hey presto’ the bar was gone and the chart looked right. PROBLEM: this lasted a few seconds!!! As soon as there was a new tick this bar reappeared!!! The only way to get it to NOT be there REALLY would be to disconnect yourself from the Internet, implement your ‘change’, and then it would stay that way UNTIL you connected again to the Internet of course. So this tells me that each BROKER has their OWN price feed EVEN ALTHOUGH the data is coming from MetaQuotes. Or shall I say: that’s what I THOUGHT to be the case with MetaTrader. But obviously I’m wrong otherwise this same bar would appear on ALL MetaTrader charts of ALL brokers that offer a Bank of America CFD.
Then again: as we know brokers can choose their own liquidity providers so that would also make sense then (I think). I know this because from within Delta Trading one can choose to trade with Deltastock’s OWN price quotes OR price quotes from four other liquidity providers and all five (Deltastock, FXCM, Interactive Brokers, Citibank, and Dukascopy Bank) of those price quotes are usually different (but only by a pip or two most of the time to be honest i.e no MAJOR MAJOR differences in price quotes). See here if you’re interested in finding out more about what I’m saying: Forex ECN / STP Level 2 | Deltastock (if my explanation makes no sense that is).
So I don’t know about MetaTrader is the ‘short version’ I guess and cannot explain any MAJOR MAJOR price differences to you.
I CAN confirm though: the tick volume is the number of ticks that make up the bar AT THE PARTICULAR BROKER. Because the Spot FOREX Market is so ‘disjointed’ (for want of a better word) and because there is no centralised exchange there is no way get the tick volume for the Spot FOREX Market in its entirety. That being said: I have it on very good authority (PurplePatchForex and the thread on the topic of VSA) that such tick volume is a reasonable ‘proxy’ for ACTUAL tick volume as one would have when say trading a stock on an exchange. There’s a nice document floating around somewhere here that details this (I know PurplePatchForex has uploaded it here or put a link to it somewhere) and makes a pretty good case and argument for this.
I not sure if any of this helps but it’s the best I can do and as much as I know right now (about MetaTrader anyway).
I am not surprised at the variations in broker feeds that you are seeing. The forex market is huge but it is not centralized. There a dozen or so big banks which operate independently of each other supposedly and they can get out of step before arbitrage brings them back into synch. Plus you have to remember that the market is open 24 hours a day. I am sure that an Asian based bank will have a different outlook on a news event in Japan than one in New York and the people in NY will be reactiing to their Asian counterparts during off hours. The opposite will be true during the US session.
Liquidity providers to the retail market are at the next level and the same thing applies to them in terms of setting and reacting to the competition and the big banks. The difference with them is their liquidity is less than the big banks, so there moves will be driven by internal considerations as well as by external events. Finally the low man on the totem pole is the retail broker who is more or less at the mercy of their liquidity providers depending on their size and whether they trade as a dealing desk or STP.
I try to think of things in the simplest terms possible and my explanation may have left out some details but I think its close to the underlying reason.
Yes, every broker uses the rates provided by his LP (and might modify them further, if he’s an MM), so they will always differ slightly.
What accounts for 35 pips difference is a mystery to me, though. 3-5 pips would appear ‘normal’, but 35 … are you really sure they are pips, not fractionals (aka ‘pipettes’), mrchilled?
35 pips would not surprise me at all during major news events or at Monday morning’s opening after an active news weekend such as we have seen in Europe from time to time.
Yes, of course, 35 pips from Friday Close to Monday Open are ok.
But we are talking 35 pips difference between brokers’ Open, on Monday morning.
That’s a lot.
100% sure. Trust me, I know the difference. Try it yourself, download Trade Interceptor software for free, then edit the settings so that they are all in tune ie 5pm EST close and download 5 or 6 daily broker data for GBP/USD, strip out weekends then look at data for tues, wed, thur and you’ll see 35 pips difference … not pipettes. Then do the same for a particular broker who supports MT4 and download their data…
Thanks for your input Dale. Off topic slightly, but is it true Deltastock offers a no carry trade (ie doesn’t charge interest) on some of their accounts?
The point I was trying to make was I removed Mondays from the comparisons and looked at open, close, high, low, volume data across a variety of brokers, and historically there is deviation of upto 35 pips on the open prices. So far, apart from Dale’s input, I am none the wiser. WHERE IS CLINT?
The differences in price quotations are a result of various brokers changing interbank feeds according to their own needs and purposes … Market Makers by definition create artificial markets for their customers.
While the difference is big (35 pips is actually pretty outrageous, I think) the explanation remains the same … and provides one more good reason why it’s better to trade with an ECN broker.
I appreciate your comments but I don’t think that answers my question. I can understand occasional blips but to see so much variation consistently across ECN, mm, stp brokers just does not make sense for daily data. Sorry but I’m still looking for a more insightful answer
Good luck.
The matter is actually rather simple, so I don’t think there is a ‘more insightful’ answer.
Brokers are greedy, so some alter the quotes downward, some upward; the result is a gap.
That’s all there is to it.
My apologies for only responding to you now (I’m wasn’t ‘Subscribed’ to this thread but am now).
Let me check. I know that sounds ‘odd’ (‘I should know’ in other words) but I’ve not been asked this question for years and I do seem to remember them offering Islamic Accounts (which by definition are ‘interest free’ or ‘swap free’) when I first ‘stumbled across them’ back then but I’ve just checked the website and no longer see those accounts mentioned anywhere and I contacted Customer Support myself as well and was told ‘no’. But either I’m wrong or my question was misunderstood or the answer is INDEED ‘no’. In other words: let me check with my ‘boss’!!! LOL!!!
I DO, however, seem to remember (if, as I say, memory serves me correctly) that even with Islamic Accounts or ‘interest free’ accounts or ‘swap free’ accounts there was a ‘charge’ or something like that (I think this applies to all brokers that offer Islamic Accounts or ‘interest free’ or ‘swap free’ accounts) and I seem to remember that it basically ‘boiled down to semantics’ (at least that was my first impression). You know that thing about ‘if it walks like a duck and it quacks like a duck …’??? LOL!!! All I’m saying is that to the best of my knowledge and with any brokers that offer Islamic Accounts or ‘interest free’ or ‘swap free’ accounts: whether you call it ‘swap’, ‘interest’, or ‘fees’, it ends up being a ‘charge’ no matter whether it’s an overnight ‘charge’, or additional commissions on trades, or wider spreads. Then again: I could be wrong. Anyone of the Muslim Faith feel free to correct me here (and most certainly not trying to offend anyone I assure you).
Regarding your data feed issues. I’m afraid I still (personally) cannot shed any more light on the subject. The only reason I can think of (and in layman’s terms) is that Broker ‘X’ is offering a different price from Broker ‘Y’ and still different to Broker ‘Z’ at those times. Remember we’re ‘TRADING’ here (not referring to you specifically but many people seem to forget this e.g. it’s no different from going to a flea market where you’ll find the same ‘products’ on sale from different vendors at different prices at the same time) Either that or the places where you’re seeing huge differences in price quotes are just ‘dirty rotten scoundrels doing their thing’. I know that’s probably a ‘lame’ answer but it’s the only thing I can think of (NOW anyway). Remember the MARKET that YOU’RE ‘TRADING’!!! LOL!!! Although that’s a TAD unfair. I see SLIGHT differences in price quotes for, say, the Dow, or the Dow Futures too (which I never thought was possible either a few years ago). But I mean SLIGHT as in ‘a cent or two’ after the close i.e. not entire POINTS. Even if you look at CNN Money and Bloomberg TV you’ll notice SLIGHT differences. But 35 PIPS would be the equivalent of 35 POINTS and that’s HUGE.
I don’t know how Deltastock handles it, but I’ve come across several brokers that offer Islamic Accounts. To qualify for one of these, one has to prove that one indeed is a Muslim.
As to purely semantic differences: Holders of Islamic Accounts are required to ‘donate’ an amount not lower than the interest that would have to be paid with a regular account; most brokers offer a list of ‘favoured’ charities for these ‘donations’.
So basically, you’ll end up paying the same; you’ll just circumnavigate the Quran’s command that no interest may be charged.
There are however several brokers who offer No-Swap Accounts without any conditions attached; the only rule to be observed relates to arbitrage.
As far as I know, those accounts have the same spreads/commissions as ‘regular’ accounts.
In any case, the swap charges with most honest brokers are negligible (in the region of 1 to 2 cents for a mini lot of EURUSD, for example), so I don’t consider it worthwhile to seek out a broker who offers No-Swap Accounts.
To shed a little light on the spreads: I’ve seen with my very own eyes on Alpari fiber with usual spread of 1.6 pips exploding their spread til 10+ pips at night time. So that’s the time when brokers widen their spread anyways because of low liquidity. And, that’s also the time where a day switches.
So, let’s do the math: One broker widens the spread 18 pips up. Another widens it 18 pips down. There you have your 36 pips difference! I smell stop hunting there, but that’s just an assumption. You have to be extremely careful with trades at low liquid times.
The same goes with spikes. If you have an ignition for a new wave and the price spikes several dozens of pips then it depends on the brokers backend how fast they can alter the prices and as they don’t like risk, they just widen the spread like in low liquid times. Tho, that’s very fast action and so you can’t see it this easily.
For day traders those times are more risky than others:
When spikes occur (news etc.)
At night time (between ny late afternoon and in the early Australia/Asian session)
If you want to trade this time, you have to widen your stop loss ~ 20 pips to normal to not get stop hunted! If you take into account the moves are usually very thin then it would explain why it would be better to completely avoid short term trades at those times. For a swing trader who has a target of more than 100 pips it can effect the strategy as well, although not that much.
Well, to take a little fear out of it: It does not happen often! The widening of spreads are currently more to max. of 5 pips if at all at those thin liquid times. That 35 pips broker difference is probably a seldom event. Right? If you trade every day, that wouldn’t affect your account much if you lose one trade more in a hundred trades.
I can confirm that Deltastock DOES NOT offer Islamic Accounts or ‘interest free’ or ‘swap free’ accounts. Sorry about that. But I needed to be sure as I noted.
Oliver1968:
Forgive my being sceptical here but I cannot see, say, the likes of, ‘enter bucketshop name here’ making ‘donations’ to ‘charities’ (although from what you’re telling me there would INDEED be a list of ‘charities’ for one to choose from)!!! LOL!!! And even IF I’m too sceptical: you’re STILL ‘out of pocket’ so it’s of no use for the purposes of trading. I DO know that somewhere around here, years ago, there was an almost ‘foolproof’ arbitrage system where one would open an ‘interest free’ or ‘swap free’ account at one broker and another ‘normal’ account (where you’d be earning the swap) at another broker. And ‘all you had to do’ was ‘balance’ those two accounts daily so that you didn’t get margin called on either account and, well, your ‘profit’ was the ‘interest’ or ‘swap’ earned. I don’t know if anyone ever tried it but with bank charges and the like AND the time that it COULD take to withdraw from one broker and transfer to the other broker (during which time you’d be WIDE open for getting margin called on BOTH accounts) I don’t think it would have been feasible. CLEVER idea. But impractical I think. Now if one could have a ‘normal’ account as WELL as an ‘interest free’ or ‘swap free’ account at the SAME broker, no ‘donations’ required, with the facility to do your own ‘instant transfers’ between accounts with no additional charges being incurred??? Well then!!! LOL!!! Does such an ‘animal’ exist??? No idea (but if you find one let us all know)!!! LOL!!!
Mr. Gecko (Buckscoder for those that don’t know):
There’s something I don’t quite understand myself. Don’t you think that brokers that widen their spreads on, say, EUR/USD during ‘quiet’ times are simply a ‘crock’???
Here is a (Investopedia’s) definition of ‘liquidity’ (to which I posted a link somewhere the other day):
[I]"Liquidity.
What does it mean?
The degree to which an asset or security can be bought or sold in the market without affecting the asset’s price. Liquidity is characterised by a high level of trading activity. Assets that can be easily bought or sold, are known as liquid assets.[/I]
[I]
The ability to convert an asset to cash quickly. Also known as “marketability”. [/I]
[I]
There is no specific liquidity formula, however liquidity is often calculated by using liquidity ratios."[/I]
Now I don’t know but unless some ‘Average Joe Retail Spot FOREX Trader’ is trading HUGE (and I DO MEAN HUGE) lots: then where is the justification for widening spreads at ‘quiet’ times??? Either that or the broker has only ONE client trading at that time!!! LOL!!!
