I really hope you don't believe this rubbish. Interestingly I interviewed on of your traders for a position once. A few points he made to me. He said your model was built on the fact that 90%+ of your clients blow their account. You therefore prefer not to hedge anything, where possible. Traders who make money spoil this scenario as failure to hedge by you leads to losses. 'succesful' traders therefore tend to be put on manual execution. When it is volatile they cant therefore deal at the required price. You are only providing liquidity to the losers, in effect. If your business model is based on long term relationships perhaps you would like to tell us what the average time a client has an account open with a positive balance on which they continue to trade? This is all fair enough but why not be honest about it? On a point of fact and market action. You claim that after a major figures prices quite often ebb before they flow. This is simply rubbish. When data like that comes out it is a one way bet for the first move. No other market maker called the dollar stronger at first on that day and nor would any player who had even the tiniest bit of knowledge unless there were other reasons for quoting a 'wrong' price. As for prop fx - can you confirm whether this model reflects the true price of currenex on which it is based - or does fxcm adjust these streaming prices on their own platform? If the prices on FXCM Pro are not identical to those of currenex how and why do the prices get adjusted?
I am a representative of FXCM. It is possible to store your stops and limits on your personal computer on the PropFX platform. On the retail platform (FX Trading Station or Trading Station II), all orders are sent to our servers and stored on them until the price specified is hit, and the limit, entry order, or stop order is executed. Stop Hunting, etc. I propose PropFX as an alternative to placate those who are suspicious that FXCM is hunting stops and trading against clients. However, this is not to say that FXCM is taking any of those actions on its retail platform. FXCM's dealers do not hunt stops, as I will explain below: FXCM has over 50,000 accounts, which means that thousands if not tens of thousands of stop and limit orders are in the market at a given time. If a stop order exists at a certain level, then a limit order is very likely to exist at the same level. Therefore, if FXCM were to artificially move the market lower to take out a long position's stop order, short positions' limits would be hit at the same time. Furthermore, FXCM would be allowing limit entry orders to buy at an artifically low price. Finally, by quoting a price lower than those quoted by banks and other market makers, FXCM would be opening itself up to arbitrage as traders bought our lower price until it rose to the true market level. To speak to FXCM's business model once more, FXCM makes every effort to provide clients with ample resources so that successful, long-term traders result. As with any type of speculation, active forex trading is a challenging endeavor and the zero-sum nature of the game make it difficult to succeed long-term. FXCM cannot assume that a continual influx of traders will prop up its business, and therefore seeks to position traders so that they can succeed in the long run. Stop hunting and similar activities not only make no sense in the short run, as explained above, but also erode FXCM's ability to build a base of successful retail traders, which is one of its primary goals.
A comment on your scenario: The stop-orders become market-orders when hit and get filled at the bid, so you make profits on the current spread (which can also artificially widen). The limit orders at the same level don't matter (you neither gain or lose).
The numbers in [ ] above are mine, for readers' convenience. Your entire argument depends on "one price" assumption: the same bid/ask is presented to every FXCM customer, in a given currency pair, at any given moment. That assumption is, in fact, incorrect. As part of a routine practice known as "price shading" - well documented to exist at FXCM over a long period of time (and, to be fair, at certain other forex market makers) - it is very easy, from a technology perspective, to stream different bid/ask prices to different customers, depending on their (known to FXCM) positions and pending orders, in a given currency pair, at any given moment. For example, some accounts with a stop at price X will be stopped out at X, while at the same time other accounts with a limit at X will not necessarily be filled at X, as you suggest. Those stops and limits you are talking about - they exist in different accounts, of course. For those who may not know this, there is no hedging feature at FXCM - you can't be long and short the same pair simultaneously, in the same account. Therefore, while [1] and [2] are true, [3], [4] and [5] are clearly not true. In other words, selective stop hunting is alive and well at FXCM, among other market makers. Until retail forex is cleaned up, that's not likely to change.
I know from my own experience with a prominent fx retailer that a retailer need not fill limits reached or breached by a quote that triggers the stops of customers who've bet the other way. Simply tell the limit customers the price is a misquote while pocketing the stops. Meanwhile, as for arbs trying to snipe the deviant price, requotes take care of that. In fact, the requote is the far move valuable trick. Why? As long as the deviant price the retailer pushes to its customers hits stops greater in value than coincident limits, the retailer can actually honor the limits and still profit handsomely (especially considering how often this can occur by minute, per hour, so on) -- no need to bamboozle the limit customers. But a size trader could negate that certainty, i.e., vaporize the house's profit from the deviant price, with a click of the buy button -- if, that is, the retailer actually honors the quote for that trader. That's the beauty of the requote. (And the point further assumes a size trader is willing to suffer the numerous risks that arise from betting with a fx retailer.) So, I agree with you.
I am a representative of FXCM. I very much appreciate your kind response. You hit at the heart of what I am trying to do, which is clarify our stance on any issues that are of a concern to clients, potential clients, or those interested in how FXCM operates. I want this forum to be as open as possible and I attempt to respond as honestly as possible on each posting.
I am a representative of FXCM. Thanks for your response and all of your good points. As to the first question of our business model, with 50,000 accounts including some where very large positions are traded, FXCM would be taking risks beyond measure if its dealers fail to offset those positions in the interbank market, as a single successful trade of size could cost FXCM hundreds of thousands of dollars. For that reason and so that it is aligned with its customers, it is FXCM's policy to offset market risk from its clients' positions in the interbank market. Finally, since FXCM aggregates thousands of orders--after offsetting 70 to 80 percent of those orders internally--prior to offsetting with a bank, a position must be built that in fact can be offset. Because the lot size on the interbank market is 1 million units, FXCM cannot offset until its clients' net positions reach that level at least. As to how FXCM deals with dealer confirmation and how that relates to successful traders, please re-read my earlier posts for details of exactly why traders are put on dealer confirmation. Dealer confirmation has nothing to do with whether a client is profitable and everything to do with a client entering into trades at off-market prices and taking advantage of technological inefficiencies. Because FXCM aggregates buy and sell orders in each currency pair prior to offsetting its exposure, it is clear that a trader can--and many of FXCM's traders do--make profitable trades and maintain profitable accounts long-term without any intervention on FXCM's part. I can only reiterate again that such a client is ideal in terms of FXCM's business model as he will remain a trader long-term and will generate profits for FXCM through the spreads on his trades. FXCM seeks traders who are profitable and offers PropFX to traders who desire to profit from technical lags and the like. As to specific records on the numbers of profitable traders holding accounts at FXCM, I will address the larger issue prior to addressing that question specifically. If one were to ask the same question of any market maker or broker of retail or institutional accounts (in forex or another market), one would not receive a detailed response for obvious reasons: trading of any kind is a challenging enterprise, and retail traders are the least prepared to succeed at it without gaining the requisite experience required to succeed. FXCM is for the most part a retail market maker, and therefore a large proportion of its traders fail to educate themselves sufficiently to overcome seemingly obvious pitfalls, such as overleveraging an account, trading without considering reward/risk ratios, and overtrading generally. This is to be expected, but it does not change the fact that a major component of FXCM's business model is to have a higher percentage of successful traders. See previous posts for information on how FXCM goes about achieving this. I do not have access to and cannot disclose any specific numbers but I hope that my explanation above will suffice. This is the best I can do in answering your question while remaining as forthright as possible in my response. As to the reiterated question regarding treatment of trades following the August 2004 Non-Farm Payrolls release, please see my previous post for a detailed response. It is FXCM's policy to honor stop, limit, entry, and market orders under normal market conditions and to answer to any complaints or disputes of its execution policies in a detailed manner on a case-by-case basis. Finally, to answer your question about PropFX and Currenex, keep in mind that Currenex is simply a software platform that enables PropFX to operate by matching up traders with interbank dealers. The quality of those prices and the resulting quality of execution clients receive is a function of the banks on the other end of each trade rather than the software itself. FXCM's position as a market leader, its size, and its resulting relationships with top-tier institutions enable PropFX's pricing to be as high of quality as it is. FXCM is compensated for making prices between banks and traders by a rebate from counterparty to each trade. The website for PropFX goes into more detail on how the platform functions, why FXCM feels it is superior, and how trades are executed than I am able to do on this forum. As always, your questions are welcome and I will respond to them in as timely a fashion as possible.
fxcm is a joke. and why would anybody trade at those spreads when there's other retail brokers offer better spreads. there propfx are honest if only they can do the same with there retail side.
Oops... you're usuallly pretty sure-footed, T/G, but you lost your footing here for a moment. 'the market'?? Which market would that be? In fact there is no one 'market' in forex, is there. A bucket shop can feed you whatever information is in their best interest, can't they? If your broker is also providing you with your quotes...
just a little help ;-) 97% of neg P&L balances is what i have observed on avg... (am sharing office space with an fx online shop i have helped set up a while back)... now is that very different from say online poker stats? probably not...