From what I’ve seen, longs open with the ask price and close with the bid price. And only the ask price widens in an upwards direction during spread manipulation, but your SL (for a long position) should be below the opening price and is therefore safe.
Contrast with a short position, you open with the bid price and would close with the ask price. Since your SL is above the opening price, the broker can widen the ask price upwards to take the SL out and there would be no evidence left behind because bars are drawn using the bid price.
As someone who actually study economics and some elements of market microstructure, the argument is silly and plain laughable.
Maybe you get this, maybe you don’t but I will refer you to Maureen O’ Hara the leading authority in Market microstructure theory after reading come back to this forum and apologise for misleading people.
Finally, ECN brokers that are usually what you guys sign up to have positions in financial terms comparable to pods of peas in an ocean of rice grains. If you say that the brokers price feed is lagging or inaccurate then this is possible based on liquidity issues but you will have to a pretty crap broker not to be able to access very good liquidity, so bad that your clients notice your liquidity sucks and in that event end up more volatile.
A liquidity provider for example is Citi Bank, they obviously deal but are market makers, in effect your broker acts like a middleman. Think of Vodafone the network and Carphone warehouse the service provider and imagine yourself saying CPW is manipulating your signal…THAT’S JUST STUPID!!
Citi for example provides liquidity to Mr X broker, who also gets liquidity from another Liquidity provider like HSBC or Barclay Capital. This inventory of cash is translated into a live feed which gives you an idea of the order flow of any particular currency pair. It is in the interest of the market makers to sell their inventory so they provide quotes that are almost identical, The Brokers then transmit this liquidity to you (The Numb Nut)to buy at a price, the spread is the Brokers mark up (He earns cold hard cash) but never holds any inventory himself so he only needs servers so you can access the orderflow feed (MT4).
Are you keeping up?..
Now you are the hotshot trader and Broker X is the guy making money of your orders win or loose, that’s why he wants you to trade hourly charts, gives bonuses and massive leverage. However, as their pocket grows they sometimes want to take positions for more sophisticated investors (Not Their positions), note this action is exposure for the broker so they make sure it is in know way tied to your orders because they know somehow JOE PUBLIC will cry wolf. Who do you know that eats where they ****?
The Market maker your Citi Banks and Barclay Capitals don’t have endless allocation of inventory and always trying to maximise, so they sell to you and you buy in the form of a buy order. This is very visible on you MT4 chart if you know what to look for, you can actually see the market maker selling and buying into the market. At certain points teh liquidity provider needs to sell inventory so he ticks prices higher to maximise and you buy, then he pulls the price back to suck in more buyers and also replenish his stock and off he goes again (The waves on your chart, Fib levels, etc) until his inventory is all gone via your Broker X, Now what???
The Market maker then decides it is time to get these f@@kers selling again. So he ticks prices lower hence markets have the habit of plummeting or better known as CRASHES. At these rock bottom levels the Market maker can re-buy his inventory at a cheaper price as his bid to drop the market has been validated by your Panic selling as the market falls even faster.
At the very bottom he (Market maker) then starts buying, this action of you selling and him buying at the same time is his accumulation phase. He whips all those weak buyers with tight stops and all those late shorts to make sure there are no more sellers that will push the price down when he starts his move to the top (STOP HUNTING). Definitely not your broker…Also weak longs or buyers will have tight stops at known clusters, this ensures the market does not move higher before they have accumulated their entire inventory, this period constitutes a sideways movement in the market (CONSOLIDATION, CONGESTION, RANGE, ETC).
Once the market maker has finished his mopping up he is now ready to repeat the cycle and he contacts his marketing department (CNBC, BLOOMBERG, ETC) and they now start pumping up any good news as the market maker uses every good and half good news to push prices higher, even bad news will be downgraded into a big picture of positivity, you now jump in and join the party even the market in these cases will now be skillfully buying his own market (THAT SH@T IS AN ART).
Welcome to the markets! Oh! You didn’t know it was musical chairs?
So you see it has nothing to do with your Brokers, your stop or those stupid EA’s. It is about the order flow. It does not matter if it is Stocks, Currency or commodities. The futures markets are one of the purest but they have big operators who play the same roll. The FX market is the most manipulated by specialists because of the intervention of Central Banks.
I find it hard to understand how people can even contemplate complaining about their stop being hunted, especially during a HUGE economic announcement like NFP or interest rate announcements.
You already KNOW in ADVANCE the spread will widen significantly and price will fluctuate rapidly as the market scoops up orders. Its pretty simple to avoid. Exit your position before the event, or keep your position size and stop far enough away from the price to keep it safe.
In the end, your stop loss is simply just another limit order waiting to be triggered into a market order once price touches it. Our accounts are so small the broker won’t say “let’s go stop this person out”. All they see are LIQUIDITY in the form of orders. Your stop loss on a long position could be grouped into a bunch of limit sell orders for break out traders. The market doesn’t care it’s your stop and someone else opening a short, it just takes the order.
On top of that, brokers like Oanda publish their historical spreads so you can SEE and KNOW in ADVANCE how wide they get during a news announcement or volatile times. As a trader,if your ignorant to that fact it’s your own fault.
as i stated this has nothing to do with events and volatility or spread widening caused by them. im in this business for 20 years now - just trust me on that - and its not one account but all the accounts with sl in a 20 pip range. a lot of money. and the historical price dbases DO NOT show it since they dont give you the widened quote - sell or buy - but the stable one. the widened one is the quote that wipes out the stop losses.
No kidding!! So you manage a fund but moan about spreads.
Not going to call you a fibber but most large speculators avoid spreads all together…Unless you are managing a tiny fund in which case you are no better than anyone here. Most of us are here to learn or share. So convincing a novice his broker is targeting him with spreads is crazy.
That said, Do you tell your clients when they loose money that it was the broker that widened the spread? (-:
SOUND’S LIKE WOLFIE!! JORDAN BELFORT GIG!! 50% pink sheet commission!!!
Hi, I am reasonably new and , I understand what is drummed into me regarding setting a stop loss,
however, looking back through my trades it is “extremely uncanny” how so many of my trades have briefly bounced to take me out at my stop and then reverse ,
Hmmm , so frustrating to think that your broker is targeting , just you ?
What have I done about it ?
Well,
1, I called and discussed this with them, and they gave me this big speal on how professional they are as an organisation and, well I don’t have time for alla that
2, but what I have also noticed is that, well , if I hold off on setting a stop loss until I am ABOVE BREAK EVEN,
Well, hey they don’t seem so interested any more ?? . And my trade continues to either rise to a profit Orr, get taken out on what I see as a “genuine” ? Stoploss
well. you’re getting ripped off. and not only you. this is big business for some brokers. solution: set the sl in your mind and get out of the trade when its reached. use an sms quote alert service if you arent at the computer. then exit via your phone. this way the spread widening wont hurt you. when expecting major news simply get out prior to the release.
I thought if the broker is a MM and they take the opposite side of your trade instead of processing it this is exactly what they do. Eat your pips as they have taken the opposite trade to your???
It is something many traders don’t know it seems. It still happens to me and I have been trading for 10 years. Hello by the way, I just joined today, based on Jürgens post. I went long AUD on Thursday night, saw it retrace on Friday and put my stop at 9320, which I though was ok, as 10 pips below resistance. Ha! My broker bounced me before they opened trading, I am saying 2 minutes before I was out! I kicked myself as I should know better, but what Jürgen describes below happened. FXCM is my broker and they are stars at this practice, although I doubt any broker is better. I lost a few pips and costs, but went right back in a couple minutes later. Placing my stop wiiiiide for the night, as Sunday, Monday US holiday etc… Stops are key, but it is more key to not know how to not get hammer timed by the brokers!
Cheers,
Rob
When he says not to use stop losses, but to set them, he means to use a mental stop loss and get out when the price reaches that level. It requires a lot more discipline and it is not for newbies.
You seem to be suggesting that it’s wrong in all cases if spreads widen during periods of low liquidity such as when trading opens on Sunday or during holidays.
It’s important to keep in mind that during such times, even the largest banks in the world can widen their spreads. When they do, our own spreads must widen as a result. The quality of FXCM’s trade execution is due in no small part to the fact that our pricing accurately reflects changing market conditions.
If another broker’s spreads don’t adjust to reflect the prices available in the market, it could be a sign that their dealing desk is taking the market risk of offsetting client orders at prices that aren’t available in the wider market. Such brokers may have to resort to re-quoting their clients or delaying their execution in order to avoid losing money.
Instead, FXCM provides traders with accurate prices and quality execution with no-requotes.
The risk of spreads widening can increase dramatically during periods of low liquidity or during news events. This is a risk you must be prepared to accept, if you decide to trade at these times. That said, you can be confident of receiving a fair price on FXCM’s No Dealing Desk (NDD) forex execution, because of how we offset your orders with our 10+ liquidity providers.
In the NDD model, FXCM acts as a price aggregator. Once our fixed pip markup is added, we take the best available bid and ask prices from our liquidity providers and stream those prices to the platforms we provide. That’s the price you see. FXCM’s liquidity providers include global banks, financial institutions, and other market makers. This large, diverse group of liquidity providers is one of the things that make this model special.
FXCM does not take a market position, eliminating a major trading conflict of interest. Your orders automatically fill from the NDD price feed, and your orders are anonymous to the liquidity providers. That means they can’t see your stops, limits or entry orders. They only see all orders as coming from FXCM.
Are you employed by FXCM whoever you are (no name). FXCM does this all the time, and traders get squeezed if they do not know. It happens at peak hours as well. Nothing to do with low volume hours. If you don’t know this, you get milked - FACT!
Rob
I honestly don’t think FXCM sends my orders anywhere.
Why would they bother to go through all the hassle with the banks when 80% of all orders get closed at ~ -30 pips.
If everybody trades with TP:30 SL:20 then it is child play to take everybody out. Move up 20, move down 40 done.
My name is Jason, and I’m FXCM’s representative here on BabyPips. This information is verified in the forum profile that appears above my posts, so if you ever have questions about your FXCM account, please feel free to ask me in the Broker Aid Station.
On that note, I would like to address your concerns about wide spreads you said you experienced during peak hours. Do you recall a specific time this happened? If you post a chart, either here or in the Broker Aid Station, I’ll be happy to take a look for you.
