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There might be a couple factual errors in the post below about Fx trading.
However while "WarLord" takes quite a critical view of the business, there is
also a large element of truth in most of what he wrote. For the small trader,
you are far better off to stick to the major Chicago exchanges. Retail Fx
came about mostly because the margin is evaporating in institutional Fx. You
can figure out the rest.
In a message dated 99-08-03 15:52:38 EDT, warlord@xxxxxxxxxxxxxxxxxxxx writes:
<< Subj: Re: Forex Trading`
Date: 99-08-03 15:52:38 EDT
From: warlord@xxxxxxxxxxxxxxxxxxxx (Andrew)
Sender: owner-realtraders@xxxxxxxxxxxx
To: RealTraders@xxxxxxxxxxxx
At 07:50 PM 8/2/99 -0400, Bando57@xxxxxxx wrote:
>I read the Forbes article.....made for very interesting reading....
>i just finished attending a seminar hosted by Global Forex and they were
>quite definitive about charging $16 round turn on commissions and that they
>dont try to make money on the spreads......they claim slippage is kept to a
>complete minimum....
>am i being naive?....
I would say that you'd need to learn about the cash FX market.
First, nobody knows what the best price is at any moment of time.
There's no exchange, quotes on the Reuters dealing system aren't
definitive.
The people who manage the customer books in the investment banks
work side by side with their proprietary traders. I know. I applied for
a such job a few years back. Job was basically, handle customer order
book, hint to the proprietary traders that I got stops coming up, we
run it, we fudge the price a little (hell no definitive best price, aka no
time and sales), I get to report to the customer he got filled on his stop
most of the time or close to it, I would also front run the customer, along
with the proprietary traders (hey, I would have a budget and I would meet
it by doing this). And all this is perfectly legal. Why can this can happen?
Brand name. You got a brand name bank, people who got rich working
at other fields think that the same standard of ethics apply. (Please
read of those tell all books by disgruntle employees from various
investments banks (I didn't get job, I think I didn't catch my face that
fast,
I already had trading job and misunderstood what the position was about).
You will pay a high spread. Slippage applies only when you got a definitive
best price or if they mean, you were filled on you stop, now you know.
Beware of small fx firms, they look like bucket shops to me. There's no
such thing as a clearing firm in the OTC fx markets. If they don't have a
credit line to a number of banks or brokers, they work with one bank,
rest assure some form of collaboration exist. Those that have credit
lines to a number of banks is probably a bank or investment bank itself.
1.5 trillion is a sales pitch. It represents the total volume for all
currencies.
It like saying there is 800k of contracts traded on CME and you are being
sold a lumber quality cross rate.
If you think this takes the cake, go to the OTC petroleum market. They are
such sharks, after meeting a brand name team, if you return to the basics
and analyse what they are trying to sell you, you spot the sharkness and you
walk away with some respect of their utter ruthlessness, if it is going to be
somebody, it sure as hell not going to be me attitude.
Trade exchange trade products, preferably electronic ones.
>its interesting to note that Global Forex were mentioned in the article as
>using MONEYGARDEN for clearing trades. I cant see how GF can keep slippage
to
>a minimum if they are using a spread market maker like MG.
>
>Also contrary to the article. At the seminar I sought experienced Forex
>traders and asked them about slippage and they seemed quite happy with
their
>fills. I didnt press the issue, but after reading the article I certainly
>would have been more forceful with my queries.
>
>I am going to quiz some more Forex traders and I will report back to the
>group my findings.
>
>Here's some more naivety on my part:
>I thought because the Forex is such a huge market (1.5 trillion dollars)
that
>finding your fill price wasnt a problem. Anyone have any remarks to debate
>this point.
>
>Rick
> >>
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