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The one thing you have to keep in mind is the spread is not the big concern.
The average FX firm small traders deal with are usually tier three and four
firms. So if you are trading with a tier three firm you could be 7-10 pips
away from the real forex market. Tier one firms are B of A's, Citicorp or
HSBC. They trade in 10 large or greater. They take 1 to 3 pips depending on
the currency. Then the other brokering firms take another 2-3 pips each.
This is like buying 100 shares of stock and paying $100 commission today.
Heck, I'd venture to say combined they make more money on an average trade
than you do. The spread is not the key here. It is who you are really
dealing with. That is why all these firms say 2-3 pip spreads on the majors.
They all say they are dealing with major dealer and or banks.
Asked them to define "major"? Even better, pop quiz- ask them for a report
showing who the counter-parties of your trades are? Try it and see what they
say.
This is why I tell people to stay out of this market unless they can trade
at least 3-5 large at minimum.
Rich
-----Original Message-----
From: unicorn@xxxxxxxxx [mailto:unicorn@xxxxxxxxx] On Behalf Of Alex
Matulich
Sent: Friday, January 06, 2006 3:39 PM
To: omega-list@xxxxxxxxxx
Subject: Re: AW: Any good recommendations for a Forex Broker????
>0.2 PIP on each side sounds like a lot to me?
Most Forex brokers create an artifical spread of 3.0 whole pips
for their customers. On EUR/USD the spread is typically only 1
pip, maybe 2. With IB you get this TRUE spread, plus pay 0.2 (a
fraction of 1 pip) commission. That's a better deal than 3 pips.
-Alex
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