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wasp

I Want Volume (spot Vs Futures)

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Hi,

 

I have come to the conclusion that the final missing peg in my trading is volume.

 

As a spot FX trader, I do not have it so my question is.........

 

Anyone tried spot and futures and can tell me if there are any major differences between the two? (that may hindrance my trading rather than enhance with volume)... ie liquidity, size, brokers, spreads, hours etc....

 

Cheers

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You can use tic volume of spot as a proxy.

 

Within a 3 trillion a day market knowing how much moves the market one pip is irrelevant. One day it might be 1 million another 1 billion. It depends on time of day and center, customer, market maker etc.

 

As for Futures then there is a constant arbitrage by the spot jokeys who are trying to pick off the retail hence the reason why there is any genuine liquidity in futures at all. Note what happens at Govt. Reports when the Arb conveniently turns its algo off

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You can use tic volume of spot as a proxy.

 

Within a 3 trillion a day market knowing how much moves the market one pip is irrelevant. One day it might be 1 million another 1 billion. It depends on time of day and center, customer, market maker etc.

 

As for Futures then there is a constant arbitrage by the spot jokeys who are trying to pick off the retail hence the reason why there is any genuine liquidity in futures at all. Note what happens at Govt. Reports when the Arb conveniently turns its algo off

 

http://www.traderslaboratory.com/forums/f24/thoughts-on-forex-volume-4227.html

 

I'll pass on the tic volume.

 

As for the rest, along with the other threads on another forum I have read, it seems futures are not the way forward.

 

Cheers anyhow

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As for the rest, along with the other threads on another forum I have read, it seems futures are not the way forward.

 

Why?

 

Note what happens at Govt. Reports when the Arb conveniently turns its algo off

 

Please elaborate.

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if you use a time based chart you can use a chart from the futures market and compare then just enter your orders on the corresponding spot market.

 

Its going to be the same chart patterns (except some will be inverse, but same idea).

 

Or you could just trade CME futures... there is increasing liquidity in those markets so depending on the size you want to trade you should be just fine.

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Why?

 

Well as you asked so nicely.....

 

 

1. Less liquidity

2. Only a few currency pairs are actually available.

3. less position size flexibility since futures lot sizes are fixed and larger than what can be had in the spot market.

4. Also, total transactions costs could be higher given commission + spread

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If I recall, as per Brownsfan(perhaps you can check with him), there is enough liquidity on the CME currency futures to trade with, plus the main advantage being a regulated market and the price moves are similar to those on the Spot market.

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If I recall, as per Brownsfan(perhaps you can check with him), there is enough liquidity on the CME currency futures to trade with, plus the main advantage being a regulated market and the price moves are similar to those on the Spot market.

 

Interesting.......... As I was reading elsewhere, the liquidity was dire and the pairs available low, but, they were older threads so if the above is the case, my interest may be re kindled.

 

I obviously want the the best of both worlds so would like to see the same sort of price action, equal or more liquidity, access to many pairs but predominately Yens, low costs, spreads and commissions and the same hours available.

 

All that with volume and regulation would make me a happy man!

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Interesting.......... As I was reading elsewhere, the liquidity was dire and the pairs available low, but, they were older threads so if the above is the case, my interest may be re kindled.

 

I obviously want the the best of both worlds so would like to see the same sort of price action, equal or more liquidity, access to many pairs but predominately Yens, low costs, spreads and commissions and the same hours available.

 

All that with volume and regulation would make me a happy man!

 

Through these guy I guess would be a good choice?

 

http://www.fxmarketspace.com/

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There is as much liquidity as you want during normal trading hours in each center due to the arb who are constantly doing exchange futures for physical (EFP) except right at Govt reports when they momentarily turn the algo off and then you will find out that the liquidity is thin and gaps quite normal. As for turning your nose up at tic volume then you obviously are not aware that tic volume is at least 95% correlated to actual cash or underlying volume on all studies done in futures marklets vs cash markets. Your point about less pairs is correct for the futures markets cannot even provide liquidity in Gbp/Jpy but in Eur/Jpy there is a constant 5 tic bid offer spread again due to the arb however to do something like Aud/Jpy you would have to trade the seperate contracts where as well there is a difference in size the Aud contract being $100k and the Jpy contract being $125k thereby creating a mismatch unless you have the capabilty of trading size.

The question as to volume I thought I had made the point in that the eternal question of how much can move the market 1 tic/pip is it depends IE sometimes it takes 1million to move the mkt and sometimes 1 billion

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Thanks Alex - what about CME's new FXMarketSpace. Any thoughts here?

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Thanks Alex - what about CME's new FXMarketSpace. Any thoughts here?

 

http://www.fxmarketspace.com/about/customers.html

 

Customers

 

FXMarketSpace provides services to institutional customers. These include banks, asset managers, proprietary trading desks, leveraged funds, currency overlay managers, hedge funds, CTAs and corporates. Customers must be "market counterparties" under UK FSA rules and Eligible Contract Participants (as defined in US legislation). FXMarketSpace does not trade with individuals trading for their own account. Customers can access FXMarketSpace by using the services of a CME Clearing Member or a Prime Broker (and the Prime Broker's affiliated CME Clearing Member).

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http://www.fxmarketspace.com/about/customers.html

 

Customers

 

FXMarketSpace provides services to institutional customers. These include banks, asset managers, proprietary trading desks, leveraged funds, currency overlay managers, hedge funds, CTAs and corporates. Customers must be "market counterparties" under UK FSA rules and Eligible Contract Participants (as defined in US legislation). FXMarketSpace does not trade with individuals trading for their own account. Customers can access FXMarketSpace by using the services of a CME Clearing Member or a Prime Broker (and the Prime Broker's affiliated CME Clearing Member).

 

Yeah, I read that too, BF. I'm looking for an institutional bank/desk trader perspective here though. Maybe AlleyB or GammaJammer can chime in, as appropriate.

Edited by forsearch

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Strikes me that fxmarketspace is about creating a platform that allows those who currently are barred from the EBS platform to participate in a similar way to how EBS operates. For individuals then the bucket shop is still the only aveneue unless you trade futures but there are many shortcomings to futures as already discussed IE the lack of pairs or at any rate liquid pairs being one of the key issues. Although futures markets standardize terms and conditions of a contract the hopscotch nature of all currency futures being a USD product thereby creating the inverse price structure to the spot in CAD or JPY or CHF also creates confusion and the fact that the GBP and the AUD and CAD are different size contracts to the Euro and CHF also does not help make the product as simple and straightforward as it could be.

For those that wish to trade a single product then the CME currency futures in the majors is great way to particpate but what some might call the exotics or others might just call the X rates is frequently where the the 10000 pip moves are located - the GBP right now of course proving to be the exception but the current move in GBP is a once in 15 year occurence

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EBS data is your best bet.

 

You can get the data feed through CQG.

 

Just thought I would repeat your post smwinc as it seemed to answer the question but somehow appears to have been missed. My understanding of EBS and how it works is this data would be a good proxy for total volume in certain cureency pairs. Anyone have any thoughts on the EBS data available through CQG? Pros, cons etc.?

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Few points - firstly EBS data would represent a good proxy for the market (in relative, NOT absolute terms of course) in maybe 4 or 5 pairs at best. These are;

 

EUR/USD, USD/JPY, USD/CHF, EUR/CHF, EUR/JPY

 

Secondly, FX Marketspace - think this may be dying a slow death.

 

Thirdly Tic volume. Knowing how it's calculated, I can't personally take it seriously. Even at times when there's correlation there most definitely isn't a sustainable cause / effect line (I bet non of these studies undertaken included granger causality modelling or anything like that). Now it is up to each trader to make his / her own minds up about this kind of thing, and it does apear to be one of those topice that polarises opinion on this and other boards. If I were being really spiky I'd say opinion is polarised roughly along lines of experience but lets not go there for now ;)

 

Wasp however, I think, may have been at least in part swayed by my arguments last time this topic came up. I posted a ton of stuff on this last time so don't propose to go into it again now.

 

fourthly - general point - the fx market, as a function of it's fragmented nature, doesn't have access to market wide data (actually, with the growth of dark pools of liquidity I suspect neitehr do many equities traders either these days but thats anotehr story). And as such hasn't grown to rely on it. Thus any analysis that uses it I'd take with a small pinch of salt.

 

My $0.02

 

GJ

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Few points - firstly EBS data would represent a good proxy for the market (in relative, NOT absolute terms of course) in maybe 4 or 5 pairs at best. These are;

 

EUR/USD, USD/JPY, USD/CHF, EUR/CHF, EUR/JPY

 

Secondly, FX Marketspace - think this may be dying a slow death.

 

GJ

 

Dead on . . for more explanation, search for other posts from GJ, he's made plenty of great explanations here.

 

Along with EBS, Reuters D2 is the other big player.

 

FX Marketspace . . never heard of it.

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As for turning your nose up at tic volume then you obviously are not aware that tic volume is at least 95% correlated to actual cash or underlying volume on all studies done in futures marklets vs cash markets.

 

This is interesting because I have just been reading hundreds of threads saying the opposite. What studies have been done that empirically show positive correlation between tic volume and the spot or even the futures market?

 

Thx.

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It also wouldn't matter if there was a 95% correlation if the 5% occurred at important times, thus making the correlation poor for assisting decision making (but how do you prove this correlation if there is no core source of volume to compare it with - which makes it sound like a factoid).

 

I'm in the "show me the studies" camp with snackly.

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It also wouldn't matter if there was a 95% correlation if the 5% occurred at important times, thus making the correlation poor for assisting decision making (but how do you prove this correlation if there is no core source of volume to compare it with - which makes it sound like a factoid).

 

I'm in the "show me the studies" camp with snackly.

 

Well if it was 95% correlated you could use it effectively by hedging for the remaining 5%. The mechanics get a bit more complicated and transaction costs would go up, but a true 95% correlation that was empirical would be extremely welcome. Afterall, the USDCHF is 95% negatively correlated to the EURUSD, is it not? That matters a lot I think. Experts feel free to correct me.

 

But Kiwi you are right, how can you show a 95% correlation without full volume data? That said, if you could correlate it 95% to EBS volume, I think that would be much more informative than having no empirical correlation at all, no?

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Afterall, the USDCHF is 95% negatively correlated to the EURUSD, is it not? That matters a lot I think. Experts feel free to correct me.

 

snackly, forgive me if I have misinterpreted your comment, but here goes...

 

This near 100% negative correlation between EUR/USD and USD/CHF is because these two are quoted inversely to each other. If EUR/CHF didn't move at all then the negative correlation between the two would be exactly 100%, but only because one is quoted with USD as the base currency, while in the other it is not.

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