Hi all, its been a while since my last post. Unfortunately I’m still a newbie but i have been
demo trading the GBP/USD for the last 4 months and have been doing ok. The system i
use doubles up (martingale) to a maximum of 3 times so if the first trade loses i have two more chances to get it right. Its given me a high win/loss ratio during the time I’ve been demo trading.Sometimes I’ll loose the 3 double uf trades but by the time that happens I’m still way ahead.
The problem is that I’m concerned about slippage. There always seems to be slippage
costs to the degree that you almost have to factor in slippage into every trade the same as you factor in spread.
Brokers rarely want to talk about slippage yet you pay for it in almost every trade.
Is there a way to minimize slippage ? How can you know that when you’re paying for the slippage that it isn’t the broker taking some cream off your trade ?
One way would be to check market depth but the market depth in MT4 does not show
people’s orders going through its just a blank column.
When trading the share market for example you can see a buy column and a sell column and you can see exactly how many people are willing to buy and exactly how many people are willing to sell. Its great because you can put your order through and actually see your order in the market depth and then you know you’ve got what you paid for without slippage.
As far as i can tell this is not possible in the Forex market which makes it easy for
brokers (and so called ecn accounts) to scam slippage out of you because you can’t
prove otherwise. Even with straight through trading it would still be easy for them to program in slippage and you wouldn’t even know.
My demo account is with Global Prime (based in Australia) I’d really appreciate it
if someone could advise on how to obtain real market depth to see your orders
or how to make sure you’re not being ripped off on slippage.
What have you been doing since October 2017 until now???
Also: given the content of this and your older post you seem to know something about trading stocks. So what has made you decide to trade retail spot FOREX???
Anyways and to answer your question:
Slippage is simply a consequence of the way that markets ACTUALLY work. Don’t get me wrong: bucket shop brokers can and will take advantage of this fact. Of that there is no question. But as noted: slippage is simply part and parcel of the way things work in the real world of trading. And here’s why:
When you place an order: in a very quiet market you should not experience slippage. But when a market is on the move: the broker can only execute your order at whatever price is available to them at that moment in time. If price has already moved away from your order price by the time the broker executes your order then they can only execute that order at the current price. This is why sometimes you well get re-quoted with a market order. Stop orders: same thing. In a fast moving market there may simply just not be the time or opportunity for your stop order to be executed at your exact price and it will be executed at the next AVAILABLE price. This is known as negative slippage (it’s against you). On the other hand: if you’re placing limit orders then it means that the order will be executed at your price OR BETTER. This is known a positive slippage.
No in light of the above it’s one of the reasons why people get stopped out at FAR worse prices than they THOUGHT they be stopped out at. This is particularly true when it comes to tight stops placed at or around news time etc. or when price gaps up or down at the open or when a so called “Black Swan” event occurs. Unfortunately: it just is what it is. There are one or two brokers that offer guaranteed stops. But mostly they’re only available on a very few select instruments. And you pay extra for the privilege.
I hope that answers your question and addresses your issues and concerned. If something is not clear: just shout.
I think there is no way to know if the brokers steal from you by means of slippage. They do own and control the platform. However, this is what i think we could and should do.
Always enter a trade that is small enough to tolerate drawdown. Before entering each trade we should already have a mental stop loss price level. By approximation, calculate the rough amount of pips you may stand to lose potentially. (my recommendation is 1% to 5% per trade)
Some people may enter a position size small enough to tolerate daily 1.5 ATR per trade, which is close to impossible to get wipe out within a day or two. By means of trade duration, they monitor their trade periodically at every major market session opening or closing.
When our mental stop loss price level got breached.
There is 4 choice we can make.
A ) Liquidate the trade immediately.
B ) Average the trade by means of another position
C ) Continue to drawdown, if you firmly believe that price will turn around base on your current analysis
D) Hedge your position, if you intend to release the hedge later on if you believe price may reverse base on your own analysis (PS : not recommended)
I believe these are the workaround solution to prevent stop out due to slippage.
PS : By the way, i don’t mean to be disrespectful, but i think looking at market depth is most probably useless in forex. If you think it is working for you, please continue use it as much as you want.
Hi Dale, thanks for your answers. I just wrote a full page response with a few follow up questions but the page didn’t allow me to post it. A pop up comes up saying “new users are not allowed to post links” but my post did not have any links. Do you know how to fix this ? or was my post too long ?
I’m guessing here but make sure that in your text you leave SPACES between any full stops. This layout seems to interpret anything like that as a link e.g. this.ma (note I didn’t leave a space between the two words so it thinks I’m trying to post a link) (but it doesn’t seem to do this for ALL letter combinations only some which I’ve not been able to figure out why).
Slippage is a trick made by the market maker brokers. As your profit is their loss, then they have to do their best not to let you win. One of the ways is that they slip the price when you want to take or close a position. When you want to buy and click on the buy button, they suddenly take the price higher, so that you will enter with a higher price than what you see on the chart. For example you want to buy EUR/USD while the buy price is 1.31216 on the platform. You click on the buy button and you enter, but when you check your entry price you will see that it is much higher than what you saw on the platform. For examples it is 1.31320.
Slippage causes you not to make the profit you could make with your winning positions, and lose more with your losing positions, because it worsen your entry/exit prices.
With the real ECN/STP brokers sometimes you see that your entry is not what you saw on the chart. You may think that they also slip the price when you enter, but this doesn’t make sense to do if the broker is a real ECN/STP broker. They don’t make money from your losses, so they don’t have to make you lose. In contrast, they want you to win, grow your account and keep on trading with them, so that they will also make more money in long term.
Slippage CAN be used to by unscrupulous brokers to cream something from the trades. BUT is is ALSO a normal function of the markets which is volatility dependant. People need to understand this clearly.
Take 2 this time with all full stops removed (each new line is a new sentence)
Hi Dale, thanks for your post. What have i been doing since October 2017 until now ?
My wife had a baby that’s what happened lol Nearly two years later I’m finally finding some
time again to do the things I’m interested in
Yes I’ve had some experience trading stocks but what appeals to me about Forex is the ability to leverage my funds and potentially make a lot more and the fact that its opened 24hrs a day
Here are a few follow up questions sorry
1 My system only requires one point of entry for one trade per day. If there is less chance of slippage when the market is quite like at around 1.00am are you saying that if i choose 1.00am as the time of entry that i am less likely to have slippage ?
2 To make a trade at 1 00am for example the market will also have less volume because its quieter
Do you know of any service provider that can supply market depth ? With market depth you would be able to see if there was enough sellers to be able to make a trade without altering the price
Just say the GBPUSD was 1 24340 at 1 00am, with market depth you could observe how many lots you could buy at 1.00am without altering the price to the next level
Is not seeing market depth like trading blind ? as you don’t know how many lots you can buy at any given moment without changing the price Especially when its quite
For example when the market is quite wouldn’t it be nice to know how many lots you could buy at the current price without altering or moving the price up ? Surely market depth must be a very valuable tool ? To also keep the broker honest as its like a receipt of your’s that you can see in the market
3 So does placing a Buy limit in the market stop slippage ? And is the down side of a Buy Limit mean that you’re order may not get completely filled ? as your limiting the order
So you have a Buy Limit at 1 24340 for 10 lots but then only 5 lots might get filled ?
Again we have no idea if orders can be filled if we can’t see market depth
With market depth you could confidently just buy at market as you’d be able to see what is available at a certain price
You’d see if there was enough sellers to fill your order of 10 lots You could also make better judgments as when to
jump into the market right ?
alphahavoc , thanks for your input via looking at slippage from a different perspective…
I managed to get my reply to Dale through by eliminating the full stops
I’ve made a few extra points in that last long post just so make my points clear.
Feel free to comment.
Wow! How big is your capital and position to not get filled? Pardon me but i’m playing with micro lot. It is almost instant filled or at most 5s to get filled. Liquidity is never a problem for me in forex trading. I have zero experience with trading such big position size. Thus, i really can’t comment much about orders not getting filled.
I mean what’s the use of market depth? It is just a bunch of limit orders or stop orders waiting to get filled isn’t it? Even if you see a large order say 10 or 20 pips away either above or below, they are just waiting to get fill. It doesn’t mean price will move towards that direction. If there are more buyers than seller, then moves higher and vice versa. I really don’t understand. I would appreciate very much , if there is anyone who can enlighten me on how we can use market depth to forecast price direction.
Great that you got your post through. Don’t worry about the full stops. Easily readable. And besides that: by the end of this thread you’ll have enough posts so as to not to have to worry about the links and stuff.
I really appreciate the time you took to answer this question. One quick question for you is; Can a broker’s server speed when executing order cause slippage?
First of all slippage is normal; this happens due to price movements, and has also a positive effect: some times (especially news " gambling") it happened that my take profit was “overruled” because price moved so fast that instead of 8 pips i got 13 pips profit.(example).
To the main point: there are brokers, especially no ECN type, who may manipulate the spread against you.(Experienced that) Especially short term trading (scalping) with small take profit could be an easy target for manipulation if they realize what you are doing.So watch out what happens if you trade well and suddenly your closing (price,duration) becomes worse- thats the start shot to change the broker.( If it is not a technical problem, thats what you have to checklout first)
I’ll answer from the bottom up shall I (reverse post order).
Most definitely. Matter of fact even YOUR Internet connection could result in your not getting orders placed.
But let’s just clarify something here:
When we’re referring to SLIPPAGE we’re talking about SLIPPAGE when it comes to stop and limit orders. SLIPPAGE when it comes to MARKET orders is a misnomer. In other words: with a MARKET order and if price has moved your order will be rejected and you will be re-quoted. Be careful with this too though i.e. I’ve seen it somewhere (cannot remember where right now) where it’s possible to set, in you platform, the maximum deviation from price for a market order. In effect you’re telling the broker to execute your market order just as long as it falls within that range. In this case you’ll probably never be re-quoted but you can be sure you’ll get the worst price possible (when you’re trying to close out manually).
But there’s a hell of a lot more to all of this.
For one thing: bucket shop brokers actually have management software that can PURPOSELY delay order execution (or even cause platform disconnects). Or there are settings that will FORCE orders to be executed at different prices from which they are placed even to the point of being able to specify by how much. There are entire suites of programs out there mainly designed to work with MetaTrader (but of course broker with proprietary platforms can accomplish the same thing with ease).
Now I’m not trying to put the fear of God into you here. But it’s one of the main reasons why your choice of broker is very important.
And touching on something I noted above:
You also have an option in MetaTrader to tell the broker to execute a stop or limit order within a certain maximum deviation from price. Not at ALL brokers but some do offer it. Be very careful if this is an option and you use it. If you place a stop order and you’re instructing the broker to execute it but only if price deviates by, say, 10 pips: if price then moves too quickly and beyond that 10 pips the order will NEVER be executed. In other words: you may just as well have NO placed a stop order AT ALL.
Right. Now to the mother load of posts on this thread!!! LOL!!!
I have to concur with another poster here:
You’re worrying about something that simply isn’t a worry. If you were in the league of being able to move price on FOREX then I am sure that you would not be posting on or hanging around a site like BABYPIPS!!! LOL!!! Put another way: it is commonly accepted that the sum total of all retail spot FOREX traders on the PLANET will not move price. So unless I’m totally off of the mark here: you ain’t moving price I can assure you.
As for market depth:
It’s only applicable to the stock market I’m afraid. All these brokers that show you market depth: it’s BS. What does it help you to see the bids and offers above or below the current market price on FOREX??? For one thing: you’re only seeing the bids and offers at YOUR broker. And as per my first paragraph above: that’s not going to make one iota of difference to you. It’s not like seeing all the bids and offers or Level II or Level III data on the NASDAQ for example. Because THERE you can see if there are HUGE orders hanging around and can trade off of that information. So again: sorry to be making this a lot less exciting but it just isn’t. It’s retail spot FOREX. And it’s a market that’s simply “dressed up” so that it appears as though it operates in the same fashion as the Equity market. It’s not. Only exception to all of this is if you’re trading FOREX FUTURES (but then you’re right back to the Equity market and not retail spot FOREX).
As for slippage:
I think I’ve pretty much addressed the issue in my other post above this.
Frankly: I cannot figure why slippage should be an issue at all unless you’re getting duped OR if you’re trying to trade the news or something like that. I can tell you that even in fast moving markets my stop orders are VERY rarely slipped EVER. But in any one trading day I can get re-quoted a few times. Not a big deal at all. Either I accept the re-quote or I don’t and give the trade a miss. And let’s face it: how much slippage could we be talking about here anyway??? A few pips here or there really shouldn’t make any material difference to profits or losses. Unless, as I say, you’re being duped e.g. instead of being able to close trades out at profits your orders are slipped to a point WAY beyond anything reasonable or the trades are being held open until they turn to losers. That type of thing.
How big is your capital and position to not get filled? Pardon me but i’m playing with micro lot. It is almost instant filled or at most 5s to get filled. Liquidity is never a problem for me in forex trading. I have zero experience with trading such big position size. Thus, i really can’t comment much about orders not getting filled.