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Who controls the spread on FX, the brokers? So, I can be trading with a cost of 0.5 pips right now, and 3 minutes later on my next trade they are taking 4 pips from me?
Can you help answer these questions from other members on NexusFi?
Regarding ECN brokers: The spreads are variable, depending on the market. ECN's don't set the spread. They just match you with other traders who are willing to buy/sell at your price. For that service they charge a commission. You can always see what the spread is using the market analyzer function (with NinjaTrader) or in MBT's platform.
Even though spreads vary moment to moment they usually stay within a tight range, which is usually lower than non-ECN's. It also depends on how you trade. I don't use the DOM feature, level 2, etc. But supposedly if you know how, you can sometimes get 0 spread. From what I understand getting 0 spread on trades isn't something you can do immediately time after time, so scalping with 0 spread at a high frequency isn't doable.
Regarding Market Maker brokers: They charge only spread, no commissions. They set the spread, so it will usually be a fixed amount except in adverse market conditions. Problem is they take the opposite end of your trade. So even though total cost is less then ECN, can you be sure they aren't screwing you somehow?
My understanding or knowledge is that the ECN's are basically just FCM's who have a credit line with other FCM's or basically they get their liquidity from other sources. For example, ATC Brokers gets theirs from FXCM. FXCM probably has several lines opened up with DB and other large FOREX transaction market makers (BANKS, etc..).
Oanda and several others HEDGE every single trade that a customer makes. So, while you are buying, they are buying as well but with another broker but probably at a better spread.
When you are dealing w/ Forex the broker can make all the difference. In my opinion it doesn't matter who the broker is, they will or can cheat you. ATC does it through fills that sure do delay and get filled at a pip or so off on every entry! You will never get your bid/ask you see on the screen or at least I should say it is rare!
If you are with a shite broker, than you will get screwed over and over again.
You'll have to do the maths to see what is cheaper. I doubt that there will be a huge difference compared to MB spot FX although I cannot comment on things such as slippage and liquidity with MB.
InteractiveBrokers is good since you can trade futures and spot FX from one account. Their Spot FX is pretty competitive,too, and execution is fast.