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silverpuma

Is Spot and Futures FX Prices the Same

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Hi all, I need some help. I bit of a basic question but one I've been pondering for a day or two.

 

Realising that the spread fluctuates constantly I have the following question.

 

I have a small account with MB Trading and since they are a ECN broker I get the market spread and pay $5.90 comms on each full std lot round trip. For example today the eur/usd was around 0.8 - 1.2 pips of a spread. But say I had a Interactive Broker account and was trading the FX futures from CME again on the eur/usd (I think its called 6E but that not important for now) would the spread be exactly the same on the 6E fluctuating in step with MB Tradings spread.

 

Maybe an easier way to say what I mean, does all spot forex ECN broker always give the same spread as a FX Futures broker are they standardised? Or to say it another way, will all good ECN brokers that work with commissions have the same fluctuating spread and all Futures FX brokers going through CME give the same fluctuating spread. o if had a IB FX futures account and a MB Trading account running simultaneously they would show the same fluctuating spread virtually all the time/

 

Better stop now as I'm starting to confuse myself;)

 

I think I made this sound more comlicated than it probably is......!!!!! :crap: Thanks in advance for any help........

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silverpuma,

 

The 6E (EC on TradeStation) or any CME futures contract has the exact same spread regardless of the broker. With the FX cash (which MB Trading also has), ECN spreads are determined by the participants and with a FX cash account with a non-ECN broker, are set by the broker.

 

Even with brokers that offer commission based accounts, there are two kinds. In a true ECN, one account holder can trade with another account holder whereas in some accounts you can only trade with the banks involved (I believe Currenex is this way).

 

That means although you can rest orders, only the banks can hit you which they never will unless your bid has become the ask.

 

Your best bet is to always ask the broker directly and not depend on your interpretation of their marketing material.

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ScottB said:

That means although you can rest orders, only the banks can hit you which they never will unless your bid has become the ask.

 

Can you expand on that a little please?

 

Thanks, Max

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Max,

 

Say the EUR/USD spot FX is 1.3188 bid by 1.3189 ask and you put a limit order at 1.3188 on an interbank platform like Currenex. No other customer can hit your limit order, only banks.

 

The banks will only hit your order if your 1.3188 order is now the ask because prices are now 1.3187 bid by 1.3188 ask. Your limit order is still at the same price but now, instead of being at the bid, it is at the ask.

 

In an interbank market, you only have the illusion of getting in at the bid, although, you do get the price you want.

 

With an ECN, another customer can hit your limit order at the bid and therefore you can get filled while 1.3188 is still the bid. I know this sounds confusing but it only applies to the spot market.

 

If you stay with the futures market, you won't have to deal with this as there is no broker created spread. I only mentioned it so you can see the differences among the various brokers (account types) and to encourage you to ask your broker any question at all.

 

There is an old saying in poker: if you sit down at the table to play and can't spot the sucker, you are the sucker. The reason 80-95% of all traders lose their money pretty quickly is they are sitting at a table with professionals and are the suckers.

 

It takes a lot of questions, hard work and unfortunately a lot of money lost to become the one sitting at the table who can spot the sucker (i.e. be the professional).

 

Don't be discouraged by what you don't know, just keep asking questions regardless of how basic they may seem.

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silverpuma,

 

The 6E (EC on TradeStation) or any CME futures contract has the exact same spread regardless of the broker. With the FX cash (which MB Trading also has), ECN spreads are determined by the participants and with a FX cash account with a non-ECN broker, are set by the broker.

 

 

Thanks ScottB for this help. So in the CME FX Futures my only decision is choosing the broker with the mix of financial stability, tight commission charges, fast and reliable execution and a good trading platform.

 

Any suugesstions?

 

My initial thoughts are an IB account using Ninjatrader as my charting package, but I'm a complete newbie to the Futures side of things . Looking forward to hearing your and others suggestions..................its all appreciated......:)

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Yes, I like Velocity Futures the best - low margins (don't overleverage though), decent commissions, great infrastructure, been around forever and great support/customer service.

 

Advantage Futures is also very good at all of the above. IB is a good choice if you are going to be trading a wide variety of instruments that include equities, stocks, options or FX (cash). Their margins are higher (which is not a bad thing), their commissions are in the ballpark (I don't know exactly but they are neither great nor awful) but they can be challenging at times to work with.

 

Also, IB does not stream prices but rather takes a snapshot every 100-200 milliseconds so if you are doing anything algorithmically, you should be aware of the implications.

 

Dorman Futures is pretty good as well.

 

There are a zillion others but I have or have had accounts at all of the above and therefore am speaking from direct experience.

 

I hope this helps and as I said, never hesitate to ask questions. There are also an incredible number of online resources that you can find.

 

Remember, if it sounds too good to be true, it is. This is a tough business, it takes an enormous amount of work to become even marginally proficient. If you see a claim or offer of service that uses any of the following, run, run very, very fast

 

Hurry, dirty secret, revealed for the first time, can't lose, all you have to do is... limited time, limited number, in only a few hours per day, etc.

 

In fact, we should start a new thread of all the catch phrases vendors/trainers use to make it sound like they are going to make all this easy.

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Hi ScottB, Thanks for all the broker info. I have been trading for a few years but using FX spot and spread betting. I'm just beginning to emerge after a long learning phase to being consistently profitable, albeit with a small fraction of my available trading capital. I see no point in adding funds until I can justify this by my results. Thankfully this is beginning to happen, but I'm a conservative trader and will manage my risk closely (i.e Max 1% of capital per trade).

 

I use price action with no indicators and look for S&R and supply demand imbalances. But a major part is trying to find other traders in areas of stress or greed (i. e. trapped traders) and gain by their stops being triggered and joining that order flow. All of this has been developed from the ingredients of James16 (paid for forum) + Sam Seiden's Supply / Demand imbalance teachings and most of all (by far) Lance Beggs at Your Trading Coach Lance has been very very helpful and his new ebook is the best I've read.

 

Anyhow, I've been reading Tom Williams "Master of the Markets" ( 3 times) and feel the addition of volume could be a help, but I'll add it slowly as I get familiar to the different nuances. The Wyckoff forum has been a great help as well. This is where the Futures FX come into play with its volume.

 

I had a quick glance at Velocity Futures and it looks good. Do you or did you use their X_Trader V 7 platform? I wonder how it compares to Ninjatrader? I had heard positive feedback from OpenCry as well. More to ponder:)

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Max,

 

I think you are doing the right thing using small leverage; being over leveraged causes a lot of anxiety and often gives rise to poor trading decisions.

 

I currently use NinjaTrader or the TT FIX gateway currently but with the last prop firm I was with, I used X_Trader API. X_Trader is the gold standard of front ends in my opinion although I like NinjaTrader almost as much.

 

I trade enough to test out my algorithms but other than that, I don't take many manual trades. The algorithms are based on basically what you trade - price action, S&R and a few proprietary calculations I have developed over the years.

 

Always more to ponder.

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