Who's telling the truth???

[Cloppa]

I'm new to forex and this site, but came across this the other day..
Have attached a word doc link and hope it works..

5m Charts from various establishments on USDCHF on FXStreets website.
Most charts are very similar, however Saxo and Alpari show a spike that is clearly not on the others.
Is this normal allowed / tolerated practice for all these brokers?
Or is this unbelieveable malpractice?
Who's telling the truth?
I thought surely Saxo would be legit!
Any advice please, and sorry if the linked format is not good. I didn't know how to upload the charts any other way!

Many thank,
Cloppa.

 

[BigT1]

Hello Cloppa,
You indeed are new to forex. I suggest you do some reading on the nature of these markets before jumping in head-first.
I am Anthony Ingrassia, an NFA registered CTA ID#: 0278164. There are several reasons for this particular discrepancy.
I will attempt to briefly cover these:
1- The forex market is an OTC (Over-the Counter) market. There is no central clearing house or exchange where all offers and bids are posted for all to see. Each market participant posts it's own bid and ask, and when discrepancies between liquidity providers occurs, they are usually quickly arbitraged by sophisticated, automated players.
2- The 5-minute charts you provided are for Wednesday, July 25, 2012, within 5 minutes of rollover time. Rollover is the time each business day when on the books of all firms ownership is recorded and the overnight interest payable is booked. The Swap Rate is the interest due or payable for holding each currency long and short in the pair, overnight.
3- Being a Wednesday, the swap rate is payable for 3 days overnight , not just for one day, as on any other night. The reason for this is that there is a 3 day settlement period for the payment of interest; so therefore on Wednesdays, the interest from the prior weekend (Friday, Saturday, and Sunday overnights) comes due and payable. This magnifies the effect, and provides holders 3 times the reason of any other day for remaining in, or not on that rollover.
4- Rollover is set at that time because the banks in all major zones of the world have completed their business day. Asia, the first to open on Sunday nights in the US, is on a Monday business open time and begins the week. ~8 hours later the London market opens, then later the US market opens. All three have closed by 5 pm NY time; which is this rollover moment where swaps rates, ownership, and net interest payable are set in stone on the books of all banks for that day. The cycle then starts again for Tuesday, etc., until NY closes on Friday and the week ends.
5- Because of these rollover events, market participants must make up their minds about holding or not each day in advance of the deadline, and do so with the vast majority of banks closed. This means traders at that time face poor liquidity. When liquidity is poor, broker-dealers and bank trading departments that service retail clients 24/5, widen their spreads because there are few participants and much uncertainty about being able to hedge or exit any unbalanced position they might assume to meet the retail trade volume. For providing liquidity, they will insist on being paid whatever the market will bear. During periods of high liquidity they must narrow their spreads to be competetive, or risk losing business.
.
What you see in the Saxo chart is likely one of their dim-witted clients trading at 5 minutes before rollover, desperately taking the bank's widely placed offer at that time, to get out of having the triple swap rate event hit their books. If you examine the 1-minutes chart with volume, you will see the wide swing on nearly no volume. Unfortunately, anyone caught with Stops within that range at that firm gets their clock cleaned as well. This is how banks and brokers make their money. You'd better be aware of it and know how to widen your stops appropriately in advance of Daily, and Wednesday rollover events, and the Weekend gap.
.
Regarding Saxo: They are a privately held bank, not a public company, and are an aggressive forex market participant making book in spot forex, but are also a principal player in the emerging world of "Options on Spot Forex" market. They provide liquidity to the interbank market. Some broker dealers are exposed to Saxo's quotes as part of their liquidity stream, while others using different liquidity providers, are not. As a result, one-off spikes on one bank's books may or may not be reflected on intermediary companys' quotes. This occurs because first, broker-dealers cross their orders internally, customer-to-customer, then against the broker's own book, before going to the liquidity providers. Only true ECN/STP brokers pass your trades straight-through to the liquidity stream, and for gaining that access to the best inside spreads, you pay a commission to the broker for the service they provide, rather than experience the brokers wider spreads. Pick your poison.
.
One more note about volume. In forex, unlike other markets, Volume is not really representative of the number of contracts, shares, or dollar value transferred. Instead it is really reflective of "The Frequency of Price Changes", plus is limited to the specific broker dealer you use. Since it is not at all representative of the size of the trade, there is no real correlation between it and the magnitude of price movement. It is more an instantaneous activity meter, rather than a money flow indicator as is true in other markets. So in the case of this spike, it very well could be that the trade was a single sizeable lot from one large holder, forced to accept a poor quote because of bad planning and poor liquidity, but would only be shown as a 1-count toward the volume, no matter how large or small the given transaction was.
.
I hope this helps explain the view from the dark side of the moon.

 

[FXCobra]

Hello Cloppa,
You indeed are new to forex. I suggest you do some reading on the nature of these markets before jumping in head-first.
I am Anthony Ingrassia, an NFA registered CTA ID#: 0278164. There are several reasons for this particular discrepancy.
I will attempt to briefly cover these:
1- The forex market is an OTC (Over-the Counter) market. There is no central clearing house or exchange where all offers and bids are posted for all to see. Each market participant posts it's own bid and ask, and when discrepancies between liquidity providers occurs, they are usually quickly arbitraged by sophisticated, automated players.
2- The 5-minute charts you provided are for Wednesday, July 25, 2012, within 5 minutes of rollover time. Rollover is the time each business day when on the books of all firms ownership is recorded and the overnight interest payable is booked. The Swap Rate is the interest due or payable for holding each currency long and short in the pair, overnight.
3- Being a Wednesday, the swap rate is payable for 3 days overnight , not just for one day, as on any other night. The reason for this is that there is a 3 day settlement period for the payment of interest; so therefore on Wednesdays, the interest from the prior weekend (Friday, Saturday, and Sunday overnights) comes due and payable. This magnifies the effect, and provides holders 3 times the reason of any other day for remaining in, or not on that rollover.
4- Rollover is set at that time because the banks in all major zones of the world have completed their business day. Asia, the first to open on Sunday nights in the US, is on a Monday business open time and begins the week. ~8 hours later the London market opens, then later the US market opens. All three have closed by 5 pm NY time; which is this rollover moment where swaps rates, ownership, and net interest payable are set in stone on the books of all banks for that day. The cycle then starts again for Tuesday, etc., until NY closes on Friday and the week ends.
5- Because of these rollover events, market participants must make up their minds about holding or not each day in advance of the deadline, and do so with the vast majority of banks closed. This means traders at that time face poor liquidity. When liquidity is poor, broker-dealers and bank trading departments that service retail clients 24/5, widen their spreads because there are few participants and much uncertainty about being able to hedge or exit any unbalanced position they might assume to meet the retail trade volume. For providing liquidity, they will insist on being paid wwhat the market will bear. During periods of high liquidity they must narrow their spreads to be competetive, or risk losing business.
.
What you see in the Saxo chart is likely one of their dim-witted clients trading at 5 minutes before rollover, desperately taking the bank's widely placed offer at that time, to get out of having the triple swap rate event hit their books. If you examine the 1-minutes chart with volume, you will see the wide swing on nearly no volume. Unfortunately, anyone caught with Stops within that range at that firm gets their clock cleaned as well. This is how banks and brokers make their money. You'd better be aware of it and know how to widen your stops appropriately in advance of Daily, and Wednesday rollover events, and the Weekend gap.
.
Regarding Saxo: They are a privately held bank, not a public company, and are an aggressive forex market participant making book in spot forex, but are also a principal player in the emerging world of "Options on Spot Forex" market. They provide liquidity to the interbank market. Some broker dealers are exposed to Saxo's quotes as part of their liquidity stream, while others using different liquidity providers, are not. As a result, one-off spikes on one bank's books may or may not be reflected on intermediary companys' quotes. This occurs because first, broker-dealers cross their orders internally, customer-to-customer, then against the broker's own book, before going to the liquidity providers. Only true ECN/STP brokers pass your trades straight-through to the liquidity stream, and for gaining that access to the best inside spreads, you pay a commission to the broker for the service they provide, rather than experience the brokers wider spreads. Pick your poison.
.
One more note about volume. In forex, unlike other markets, Volume is not really representative of the number of contracts, shares, or dollar value transferred. Instead it is really reflective of "The Frequency of Price Changes", plus is limited to the specific broker dealer you use. Since it is not at all representative of the size of the trade, there is no real correlation between it and the magnitude of price movement. It is more an instantaneous activity meter, rather than a money flow indicator as is true in other markets. So in the case of this spike, it very well could be that the trade was a single sizeable lot from one large holder, forced to accept a poor quote because of bad planning and poor liquidity, but would only be shown as a 1-count toward the volume, no matter how large or small the given transaction was.
.
I hope this helps explain the view from the dark side of the moon.

Good Explanation Anthony for the point of rollovers and prices spikes at that time.

****Unfortunately, anyone caught with Stops within that range at that firm gets their clock cleaned as well. This is how banks and brokers make their money. You'd better be aware of it and know how to widen your stops appropriately in advance of Daily, and Wednesday rollover events, and the Weekend gap.****

We must not always put the fault on brokers and banks in such conditions that are known in advance for all traders, despite it being a fact(making money..etc)
When traders know that there will be spikes in that time, why set the stops very small and close to the market price at that time to later blame the broker
Instead of getting confused what the spike number/pips could be, DO NOT SET A STOP LOSS in those periods. Can not be more simple than that.

As much as brokers/banks make money from stops, at same time traders make money from entering and exiting quickly(shortly) few minutes before and after rollover period to take advantage of the big rollover for the currencies that have high interest rates.
This is a tactic used by many traders including myself. You can make some good money from rollovers on high rates currencies but it also depends on your broker.
Some brokers make it very hard by widening the spread and keeping it like that for some 15-30 minutes(those are big question mark brokers?!), but the Good brokers with normal action in such conditions widens spreads before few minutes of rollover period switch and after it by few minutes which makes it easier for traders who knows to trade in those conditions to profit.

To add to the point Anthony had said about Wednesday rollover being Triple or 3 times it than other days.
In some days(mostly of Wednesdays) through the calendar, it can be much more than the 3 times of the regular Wednesdays according to what Central Banks had set.
Knowing that traders can make much more money.

Setting a stop loss (and take profit) before the weekend would not guarantee it being filled by broker when market open on sunday nights if there's a weekend gap, so better without it, be there at market open to exit manually.

 

[BigT1]

FxCobra,
A careful re-read of what I wrote will reveal to you that I was explicitly recommending consideration of the widening of stops at these times, not the reverse; as it seems you incorrectly inferred. I meant and indeed implied no disparagement of broker-dealers; in-fact I went out of my way to explain their predicament in this case. I thought the originator of this thread had a valid, common, and understandable reaction to the curious facts so well presented; and deserved nothing less than a well thought-out explanation.
.
I was writing quite diliberately and carefully in response to someone who admittedly is a somewhat inexperienced trader; someone whose questions about these realities have likely gone unanswered. This is contrary to what you suggested. I did so at considerable cost of my time and effort.
.
Please recognize that as a registered entity, I must always be extremely careful in the precise use of language, my diction, and my concentrated effort to succinctly impart explicitly true meaning and intent. My posts here on FPA are meant for the overall betterment of the wider trading community; not soley for the individual to whom I may respond. My personal reputation, my CTA license, and my credentials as a fiduciary are all dependent upon this at every turn. In spite of the risk, I endeavor to make my posts as interesting and colorful as possible, whenever such punctuations serve the greater purpose.
.
Please recognize that my public posting of ANYTHING here threatens my CTA license at every turn. There is little upside for me to take this risk daily; but for the commitment to you that my integrity is more valuable to me than my license.
.
In light of this, would you kindly reread, rethink, refocus, and consider modifying your somewhat haphazard and incongruous response? I am sure you are very well intentioned, and I mean you no ill-will or disrespect; but I feel your scattered remarks here serve to cloud a true and proper understanding for all those others concerned.
Thank you,
AI

 

[FXCobra]

FxCobra,
A careful re-read of what I wrote will reveal to you that I was explicitly recommending consideration of the widening of stops at these times, not the reverse; as it seems you incorrectly inferred. I meant and indeed implied no disparagement of broker-dealers; in-fact I went out of my way to explain their predicament in this case. I thought the originator of this thread had a valid, common, and understandable reaction to the curious facts so well presented; and deserved nothing less than a well thought-out explanation.
.
I was writing quite diliberately and carefully in response to someone who admittedly is a somewhat inexperienced trader; someone whose questions about these realities have likely gone unanswered. This is contrary to what you suggested. I did so at considerable cost of my time and effort.
.
Please recognize that as a registered entity, I must always be extremely careful in the precise use of language, my diction, and my concentrated effort to succinctly impart explicitly true meaning and intent. My posts here on FPA are meant for the overall betterment of the wider trading community; not soley for the individual to whom I may respond. My personal reputation, my CTA license, and my credentials as a fiduciary are all dependent upon this at every turn. In spite of the risk, I endeavor to make my posts as interesting and colorful as possible, whenever such punctuations serve the greater purpose.
.
Please recognize that my public posting of ANYTHING here threatens my CTA license at every turn. There is little upside for me to take this risk daily; but for the commitment to you that my integrity is more valuable to me than my license.
.
In light of this, would you kindly reread, rethink, refocus, and consider modifying your somewhat haphazard and incongruous response? I am sure you are very well intentioned, and I mean you no ill-will or disrespect; but I feel your scattered remarks here serve to cloud a true and proper understanding for all those others concerned.
Thank you,
AI

Wait Wait Wait Stop Stop Stop HERE

Do you even know what you just wrote!!!!!!

To make it short, your whoooooooole paragraph was useless. For what did you post that anyway!!!

In what does that help anyone here anyway???

You must understand and know to sit on your fingers before jumping up conclusions and writing things not needed whatsoever.

I replied to your post and said it was a good explanation but there were points that needed better explanation.

Where had I offend you to reply in such a hatred way or hard feelings, or that's the only thing that came up to your mind!!

I replied to help the traders who might be mislead(or need more info) with the sentences quoted from your other post.

Instead of replying in same respectful way and purely highlighting the trading points I discussed, you went far to another place in your reply with useless sentences that helps in nothing!!

What's the big deal in what you said? Speak!

Or when any person talk to you or write in reply, bubbles come up and you imagine its something offensive or somebody want to hurt you or your profile

Who cares from all FPA members if you have a CTA license or all what you said of scarifying.blah blah

Were you promoting yourself or something!!!?

Why did you bring all that at first!?!?

Briefly, my post is shown for all to read & see how I replied specifically to what can be helpful for traders but what was your reply about?!!

Showing off yourself or something

In what did that help anyone here but your ego(maybe) or as a continuation of jumping to conclusions before READING WELL.

You "AI" want to teach me what and how to read, think, or focus!!!

I will stop here to not write something hard to your feelings(but the Truth) and to not turn this post to something off-topic as you had done.

 

[athenafx]

FXcobra you can't be so aggressive towards BigT1.

He does not hide behind a pseudo. He is registered/regulated in USA just like AthenaFX is in Switzerland.

Who are you ?

He does not have to promote himself because many retail traders have not enough money to hire an asset manager.

If some traders would like to understand more. I suggest they invest in a proper equipment such as Bloomberg, Reuters, .... and spend all required time to learn.

For example, take a look at the order flow (especially EBS). Take a look at options barriers. Take a look at gamma to monitor the market makers activity.

Many daily traders place orders on the spot without any information concerning the order flow and no knowledge about options. Can you believe it ?

 

[FXCobra]

FXcobra you can't be so aggressive towards BigT1.

He does not hide behind a pseudo. He is registered/regulated in USA just like AthenaFX is in Switzerland.

Who are you ?

He does not have to promote himself because many retail traders have not enough money to hire an asset manager.

If some traders would like to understand more. I suggest they invest in a proper equipment such as Bloomberg, Reuters, .... and spend all required time to learn.

For example, take a look at the order flow (especially EBS). Take a look at options barriers. Take a look at gamma to monitor the market makers activity.

Many daily traders place orders on the spot without any information concerning the order flow and no knowledge about options. Can you believe it ?

Who was aggressive?? Where had you seen that!?!?

Didn't you read what he said from reply that came offbase and offtopic or you work & reply as "same types stand for each other!!"

I am X. Nobody cares who you are, religion, ethnic, color or any regulation or registration(many brokers get it for MONEY), but what you think, what you do, what you can afford to others.
You added to his useless paragraphs with sentences that help in nothing but promoting your name as he had done.

To understand better the rollover, you tell some traders to INVEST in this and that. My explanation was enough for that and they can know more anywhere from starting a simple google search for forex rollover, without your INVEST advice.

***Most daily traders*** From where did you get that statistics?? From the same 99% of Forex traders loose illusion
If that percentage is correct, your stat is correct!! Traders leave trading and find another job but you must do the same in such case

I talk in the name of Traders as one of them, you talk in the name of regulatory brokers & companies. We meet in nothing.

I helped traders in something in my reply. What had you both done!?!? Reply with offtopicc and arguments that lead nowhere.

Your sentence: **He is registered/regulated in USA just like AthenaFX is in Switzerland** say it all.

You do not tell me what I CAN and what I can not. I write what I believe in and what's right.

Remark End.

 

[athenafx]

@fxcobra

I am a trader.

Your comments are non sense.

BigT1 will reply if and when he would like to.

 

[BigT1]

@fxcobra I am a trader. Your comments are non sense.
BigT1 will reply if and when he would like to.

My thanks AthenaFx for your kind words, and for coming to my defense against a seemingly disturbed member.
For the record, I am semi-retired, after becoming partially disabled due to a serious industrial accident in 2008. I currently trade only for my own account. I have maintained my CTA license since 1996, but had returned to a prior engineering career in Diagnostic Medical Imaging (CT, MRI, X-Ray, Mammography) when on 9/11/2001 the proprietery trading firm I worked for at the time was bankrupted by the collapse of the World Trade Center (where it's clearing was headquartered). I have not managed any client funds since that time.
Because I am inactive with the NFA, I feel freer to openly identify myself here, express some personal opinions, and attempt to add some perspective from a professional point of view to this forum, than could other registered entities whose careers would be on the line by doing so.
In addition to the CTA, I was also an NASD Registered Series 7 Stockbroker for AG Edwards, a professional risk manager for the Chicago Corp, ABN AMRO Bank in the Energy markets at the NYMEX, and prior to that a New York State Licensed Life and Health Insurance Agent for the New York Life Ins. Co.
.
Contrary to the assertions posted here of "self-promotion", my only purpose here is to help restore some modicum of respectability to an industry so gravely damaged by the greed and averice of so many in the financial industry. I find it embarrassing and depressing to see so many thieves and soundrels lining their pockets with no regard for the fiduciary responsibilities that as licensed professionals they are sworn to uphold. For those interested, I have posted several scathing reviews of professional firms; a quick search of my posts will reveal.

 

[FXCobra]

@fxcobra

I am a trader.

Your comments are non sense.

BigT1 will reply if and when he would like to.

Know how to write without editing for every few words before you reply