Re – 2 traders required to complete team of 4

[ChocolateDigestive]

Why's that? In case Martinghoul comes back and calls you on your bull5hit again?

Bless

lolol. Sadly not Martinhoul was actually wrong about the spot FX issue, he is just a giant walking textbook, doubtful he is a profitable trader. Academic types rarely are.

If you recall he was saying that using the 'zero sum game' argument to explain why retail traders loose is not valid for spot FX. I have since thoroughly researched the matter and of course he is wrong and I was right all along.

Of course the better informed larger players in the market take money from the lesser informed smaller players for so many reasons I am not going to go into.

The IB's make money from other services like selling options but they rarely take a loss on the spot FX position, it's called 'hot potato' trading, they just instantly get rid of any risk they don't want through a dealer to work the order, this new participant then likely does the same with this order flow and so on. If they do take a loss it's a tiny loss and on average they are net positive on their spot FX transactions What this means is that the reported volume on spot FX is predominantly 'hot potato' trading and the market is a lot less liquid than people think. Plenty of studies have been conducted on this matter including one where the true liquidity of the OTC spot FX market was likened to the futures 6E cme contract.

Of course it is in many peoples interest to market the Spot FX market as the most liquid on the planet. numpties like yourself.

The 'zero sum game' postulation was and still is a very powerful tool in analyzing why some traders lose and some traders win.

Of course I wouldn't expect you to understand that as you don't actually trade and I leave you to continue your trolling.

in short this discussion is way above the heads of participants of a trading forum especially academic imposters such as martinhoul.

good day.

 

[scose-no-doubt]

Shocking.

Wish I had the ability to thoroughly research something in two weeks of spare time

If I did that I'd probably come back with a load of codswallop and tripe but thinking I'm the dogs

 

[The Leopard]

Plenty of studies have been conducted on this matter including one where the true liquidity of the OTC spot FX market was likened to the futures 6E cme contract.

That's very interesting. Can you expand upon that please?

 

[ChocolateDigestive]

Shocking.

Wish I had the ability to thoroughly research something in two weeks of spare time

If I did that I'd probably come back with a load of codswallop and tripe but thinking I'm the dogs

well it only took an hour or so son, pretty much a waste of my time though as it only confirmed what I already knew that the 'zero sum game' postulation is fine.

as a profitable trader I need masses of moronic, retarded traders to donate their money to me after all it is a 'zero sum game'.

You should take up trading, I am thirsty for your account. lol.

GTTY (good trolling to you)

 

[scose-no-doubt]

 

[Omoh101]

well it only took an hour or so son, pretty much a waste of my time though as it only confirmed what I already knew that the 'zero sum game' postulation is fine.

as a profitable trader I need masses of moronic, retarded traders to donate their money to me after all it is a 'zero sum game'.

You should take up trading, I am thirsty for your account. lol.

GTTY (good trolling to you)

Sent you a PM CHOC D

 

[ChocolateDigestive]

Sent you a PM CHOC D

got it, will reply by close of play.

 

[ChocolateDigestive]

That's very interesting. Can you expand upon that please?

well Leopardo. As you know FX is marketed to wannabe traders under the proviso that it is a $4 trillion market, super liquid, big leverage. How much of this trading though is true volume and how much is just 'hot potato' trading.

take a look at this:

http://www.bis.org/publ/qtrpdf/r_qt1012e.pdf

page 33 shows the EBS spot notional volumes against CME FX futures. EBS is the highest volume spot FX platform for the majors. What the graph shows is that CME is on track to overtake EBS in terms of volume.

the actual true liquidity of the the spot FX market is very difficult to ascertain. say some brazilian mining company calls up their broker at deutsche and says I need to convert some brazillian real to sterling, of course DB is going to try and get this flow and make money from it, however are they going to sit on the whole other side of the trade, of course not, they will take an opposite position, the participant that takes the other side of this new position will then do the same and so on.

then of course there is the smell test. pull up a chart of FX and compare it to something liquid like the ES futures or T note, notice how the FX behaves like an illiquid instrument, prone to wild swings, the ES/ZN are nice and smooth, anecdotal evidence perhaps.

The actual point of my 'why retail traders lose' post was to then go on to show how the FX market is gamed. i.e. the larger players who can move price can and will take money from the smaller players and this is just the nature of the 'zero sum game' that is in play. I was going to give a specific example without divulging too much knowledge, if you think about what other information other participants are FORCED to reveal then you can work from there.

I am not going to post specific examples as it would just result in a flame war between failed traders / non - traders and vendors. absolutely no upside so wont be doing it.

Of course the thread was littered with moronic posts saying things like Deutsche Bank would never manipulate price to take out a spread bet account and pointless arguing over the actual % of losing traders (gulp! wtf).

the hilarity of someone actually posting 'yeah but in some cases the spot FX is a loss leader against another bank product' is stark. IB's rake money in from FX end of, if you think otherwise you are very much mistaken.

The spot FX market is actually a lot less liquid than people are led to believe, price is gamed a lot of the time and money is transferred from the smaller lesser informed traders to the better informed larger players.

I actually have very little time for anyone who doesn't believe said money transfer takes place and that trading is a zero sum game - quite frankly trading is tough but without grasping this most basic concept a McJob would be more fitting.

 

[The Leopard]

The spot FX market is actually a lot less liquid than people are led to believe...

This was my understanding. Thanks for the link, I'll have a proper read of that later when I have time.

It is certainly interesting about FX futures, I found that graph quite surprising.

Do you trade CME FX futures? If so, how do you find it?

 

[ChocolateDigestive]

This was my understanding. Thanks for the link, I'll have a proper read of that later when I have time.

It is certainly interesting about FX futures, I found that graph quite surprising.

Do you trade CME FX futures? If so, how do you find it?

no i don't trade the 6E futures just spot FX but certainly the futures are more transparent, I have watched the 6E tape alongside a spot chart for research purposes, from what I can tell similar games occur. generally I look to see what the smaller traders are likely to be doing until the larger player finishes their baiting, then you just need to front run the final moves which are normally the most convincing and time specific. Once you couple this with information that other participants are FORCED to give away you can have a great edge. I have seen some other players trading liquidity gaps which is also very interesting but again beyond the scope of an internet discussion forum and the participants therein (high % failed traders, trolls, vendors)

FX could easily be a centralised market but part of the reason why this has been resisted is that keeping it OTC plays into the hands of the larger players.

 

[scose-no-doubt]

 

[ChocolateDigestive]

GTrollingTY :whistling

 

[scose-no-doubt]

 

[BeginnerJoe]

The spot FX market is actually a lot less liquid than people are led to believe, price is gamed a lot of the time and money is transferred from the smaller lesser informed traders to the better informed larger players.

Tell me something I don't know. Them beeches would come after my 0.0001 pence bet with great relish as if their dinner money depends on it.

 

[wackypete2]

What the graph shows is that CME is on track to overtake EBS in terms of volume.

I'll offer a possible explanation for this. US retail traders in spot FX are subject to 4x more margin than CME currency futures. Many spot fx traders have moved to futures. This was the real plan behind the margin increases.

then of course there is the smell test. pull up a chart of FX and compare it to something liquid like the ES futures or T note, notice how the FX behaves like an illiquid instrument, prone to wild swings, the ES/ZN are nice and smooth, anecdotal evidence perhaps.

Here's more anecdotal evidence.Try to trade a 10+ lot with many brokers and watch the excess slippage. With $4 trillion traded per day how does slippage like that occur. In spot fx traders are limited to the liquidity of their broker and NOT the entire market, even if the broker is a (limited) ecn.

MOST of the liquidity/trading in fx is between the 10 large banks. Retail traders make up a very small part of currency trading in terms of $$ volume. I believe CD and I were discussing this some time ago, although I may be mistaken. My mind is a bit fried today.

Peter

 

[Shakone]

EBS is surely only a part of the total spot volume, there's reuters and then there's trades that don't take place on either. What % of daily spot volume is on EBS anyway?

I agree with Wacky, as a retail client we're really only seeing a tiny fraction of what is available.

I don't think you can reasonably say it is illiquid though. Liquidity and typical daily volume are two different things. I don't really understand this 'smell test' that Choccy D mentions, and talk of being prone to swings indicating illiquidity...you'll have to explain that, because it's making no sense to me.

 

[ChocolateDigestive]

Tell me something I don't know. Them beeches would come after my 0.0001 pence bet with great relish as if their dinner money depends on it.

Hey BJ

well they are after your little bets but not individually, no disrespect BJ but the dealer brokerage model relies on what they call 'dumb flow' it's a huge edge for them, in some cases they are paying negative spreads at source because dumb flow has a value to it. When the dealer gets a net directional position he doesn't like they just shade the price out enabling a break even or small profit hedging transaction further up the chain.

 

[ChocolateDigestive]

Here's more anecdotal evidence.Try to trade a 10+ lot with many brokers and watch the excess slippage. With $4 trillion traded per day how does slippage like that occur. In spot fx traders are limited to the liquidity of their broker and NOT the entire market, even if the broker is a (limited) ecn.

Hey Pete. I can tell you why you get slippage through a retail brokerage. Retail brokerages usually operate the dealer model i.e. you are not trading an exchange you trade their price like it or lump it. They take their feed from one of institutional platforms. These platforms have a feed where you can trade size and they also supply a feed to the dealers, these feeds are different because the liquidity providers know they are getting dumb flow, I believe they are called wholesale feeds. As the dumb flow is more valuable the spread is much tighter and will often be inverted across the best bid best ask of the providers, the providers are stupid though they will not offer size so you can only get a couple of lots off and the provider will not get taken for a ride. The inst. platform will soon cut you off if you continually pick off the negative spreads their providers don't want that flow, they only want the dumb flow for that feed.

This is why you get slipped at a retail bucketshop, as there is not much size on the bid/ask. The bucket shop just adds their margin onto the wholesale feed.

MOST of the liquidity/trading in fx is between the 10 large banks. Retail traders make up a very small part of currency trading in terms of $$ volume. I believe CD and I were discussing this some time ago, although I may be mistaken. My mind is a bit fried today.

Peter

I think retail volume is a greater % than people realize there is a vested interested in getting dumb flow to think forex is more liquid and higher volume than it is. I suspect retail volume is 10%+ but FX is a shady business there are no figures. As explained above the dumb flow is just converted into dealer model profits and hedged off with price shading when it gets out of line.

all of this is alleged of course

 

[scose-no-doubt]

all of this is bollox of course

fify

 

[ChocolateDigestive]

EBS is surely only a part of the total spot volume, there's reuters and then there's trades that don't take place on either. What % of daily spot volume is on EBS anyway?

I agree with Wacky, as a retail client we're really only seeing a tiny fraction of what is available.

I don't think you can reasonably say it is illiquid though. Liquidity and typical daily volume are two different things. I don't really understand this 'smell test' that Choccy D mentions, and talk of being prone to swings indicating illiquidity...you'll have to explain that, because it's making no sense to me.

I believe EBS have c. 20% market share the most for the majors and reuters 2nd, reuters most for non major pairs.

I dont think FX is illiquid but I think it is less liquid than people are led to believe and certainly when people trade through a dealer model the liquidity is a lot less hence the slippage. (see my posts above).