What slippage is normal? Stats on my 4621 trades

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Old Jan 25, 2016, 5:33pm   #1
 
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What slippage is normal? Stats on my 4621 trades

Hi all!

Iíve been trading for about 5 years - algo trading on the majors, doing 5 to 50 intraday trades per day per symbol, flat at the end of each session.

Iíve been analyzing my trades - profits and losses, and recently I have figured out the exact impact of slippage on my trading results. Below is the explanation of my measurements and calculations. Pretty substantially not in my favor I must say.

I built a script to calculate the differences between the prices my algo sees when sending trades and actual execution prices. My algo is hosted on a VPS CNS and Iím trading on a Pepperstone Razor account, so the latency to brokerís server is not more than 1 ms.

Iíve collected data for more than 1.5 months and now I have stats on 4621 trades and got following results:

Click the image to open in full size.

This means on average I lose about 1.71 pips (4th decimal) on slippage each trade .
Having 10 trades a day means that I lose on slippage 17.1 pips a day -> 376.2 pips per month -> 4,514.4 pips a year.

When I calculate the sum in USD the figure really scares me - itís 4 times more than I have in my account!!! If I could keep this money Iíd be way closer to retiring.

At your brokers - what slippage do you see?
What do you do to reduce your losses from slippage?
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Old Jan 25, 2016, 7:09pm   #2
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Originally Posted by MarkDragon View Post
Hi all!

Iíve been trading for about 5 years - algo trading on the majors, doing 5 to 50 intraday trades per day per symbol, flat at the end of each session.

Iíve been analyzing my trades - profits and losses, and recently I have figured out the exact impact of slippage on my trading results. Below is the explanation of my measurements and calculations. Pretty substantially not in my favor I must say.

I built a script to calculate the differences between the prices my algo sees when sending trades and actual execution prices. My algo is hosted on a VPS CNS and Iím trading on a Pepperstone Razor account, so the latency to brokerís server is not more than 1 ms.

Iíve collected data for more than 1.5 months and now I have stats on 4621 trades and got following results:

Click the image to open in full size.

This means on average I lose about 1.71 pips (4th decimal) on slippage each trade .
Having 10 trades a day means that I lose on slippage 17.1 pips a day -> 376.2 pips per month -> 4,514.4 pips a year.

When I calculate the sum in USD the figure really scares me - itís 4 times more than I have in my account!!! If I could keep this money Iíd be way closer to retiring.

At your brokers - what slippage do you see?
What do you do to reduce your losses from slippage?
The question is what is your LOT SIZE? Slippage depends mostly on lot size, if its big enough you'll get slippage with any broker for sure.
Open 2-3 more accounts with other brokers like Нotforex and FXCM and launch your software there with proportionally smaller lots and thus slippage.
A Way to go !
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Old Jan 25, 2016, 9:33pm   #3
 
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Originally Posted by MarkDragon View Post
Hi all!

I’ve been trading for about 5 years - algo trading on the majors, doing 5 to 50 intraday trades per day per symbol, flat at the end of each session.

I’ve been analyzing my trades - profits and losses, and recently I have figured out the exact impact of slippage on my trading results. Below is the explanation of my measurements and calculations. Pretty substantially not in my favor I must say.

I built a script to calculate the differences between the prices my algo sees when sending trades and actual execution prices. My algo is hosted on a VPS CNS and I’m trading on a Pepperstone Razor account, so the latency to broker’s server is not more than 1 ms.

I’ve collected data for more than 1.5 months and now I have stats on 4621 trades and got following results:

Click the image to open in full size.

This means on average I lose about 1.71 pips (4th decimal) on slippage each trade .
Having 10 trades a day means that I lose on slippage 17.1 pips a day -> 376.2 pips per month -> 4,514.4 pips a year.

When I calculate the sum in USD the figure really scares me - it’s 4 times more than I have in my account!!! If I could keep this money I’d be way closer to retiring.

At your brokers - what slippage do you see?
What do you do to reduce your losses from slippage?
Can you run things just using limit orders? If you can then the only slippage you might experience would be positive.
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Old Jan 26, 2016, 12:26am   #4
 
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Originally Posted by MarkDragon View Post
At your brokers - what slippage do you see?
What do you do to reduce your losses from slippage?
Welcome to the forum, MarkDragon!

Traders experience positive slippage more frequently with FXCM than negative slippage, because we provide you with order options like "Market Range", "Range Entry" and "Maximum Deviation" to help you minimize your negative slippage while still receiving the full benefits of any positive slippage that's available. In addition, our Trading Station platform lets you set your orders to be "Fill or Kill", or "Immediate or Cancelled" helping to minimize negative slippage on larger orders.
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Old Jan 26, 2016, 11:04am   #5
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Originally Posted by Jason Rogers View Post
Welcome to the forum, MarkDragon!

Traders experience positive slippage more frequently with FXCM than negative slippage, because we provide you with order options like "Market Range", "Range Entry" and "Maximum Deviation" to help you minimize your negative slippage while still receiving the full benefits of any positive slippage that's available. In addition, our Trading Station platform lets you set your orders to be "Fill or Kill", or "Immediate or Cancelled" helping to minimize negative slippage on larger orders.
wasn't always like that though was it Jason?

https://www.fca.org.uk/news/fca-fine...n-with-the-fca
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Old Jan 27, 2016, 8:01pm   #6
 
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Originally Posted by highbury fx View Post
wasn't always like that though was it Jason?
Yes, but perhaps you were unaware that we reimbursed all current and former FXCM UK clients in full for any positive slippage that was not passed on prior to 2010. Furthermore, the improvements we made to made to our platform back then mean that we are now one of the only firms in the industry to pass on positive slippage to our clients in full for all order types and to make our execution statistics proving this fact freely available to all traders: http://bit.ly/1KWaV8g
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Old Jan 28, 2016, 1:58am   #7
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Yes, but perhaps you were unaware that we reimbursed all current and former FXCM UK clients in full for any positive slippage that was not passed on prior to 2010. Furthermore, the improvements we made to made to our platform back then mean that we are now one of the only firms in the industry to pass on positive slippage to our clients in full for all order types and to make our execution statistics proving this fact freely available to all traders: http://bit.ly/1KWaV8g
I like FXCM Jason but its a bit cheeky of you to say we used to be bad at slippage but we're not anymore only after you've been fined millions and bought to task by the FCA. Personally i would have kept my head below the parapet on this one.

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Old Jan 28, 2016, 8:33pm   #8
 
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Originally Posted by highbury fx View Post
I like FXCM Jason but its a bit cheeky of you to say we used to be bad at slippage but we're not anymore only after you've been fined millions and bought to task by the FCA. Personally i would have kept my head below the parapet on this one.

I'm glad to know you like FXCM, Highbury FX (#coyg)

How do you feel about brokers that withhold positive slippage from their clients and slippage stats from the public to this day?

It's important to understand that as an industry leader, FXCM is subject to a greater level of scrutiny than smaller, less-regulated forex brokers. We are one of the only retail forex brokers in the world that's regulated on three continents and a publicly-traded company (NYSE ticker: FXCM) averaging $14.7 billion per day* in retail customer trading volume. We welcome this position of responsibility, and our retail clients who place 501,108 trades through us per day* are glad we do.

FXCM takes regulations very seriously and believe it is in the best interest of our clients for us to have regulatory oversight and transparency. That's why we have over 80 employees in our compliance department as mentioned by our CEO Drew Niv in a recent earnings call. That's not to excuse previous regulatory actions, but rather to emphasize how we actively work with our regulators to resolve issues and ensure the best trading environment possible for our clients.

The FCA action for positive slippage not being passed on prior to 2010 is a case in point. FXCM reimbursed current and former clients who were affected in full. Furthermore, the changes we made in 2010 mean that FXCM is now one of the only firms in the industry to pass on positive slippage on all order types including market and limit orders.

It's worth noting that to this day, some brokers may still not provide positive slippage to their clients, while others may provide positive slippage on some order types, but don't provide it on other order types. Some brokers may re-quote their clients when the price moves in their clients' favor but fail to re-quote when the price moves against them. There are no re-quotes at FXCM.

Furthermore, FXCM offers true limit orders on all the platforms we offer including MT4. That means our clients cannot receive negative slippage on their limit orders, only positive slippage. By contrast, some brokers treat limit orders on MT4 like market orders when triggered opening up the possibility of negative slippage.

When FXCM was founded in 1999, we were one of the pioneers in what is still a relatively young and quickly evolving industry that is retail forex. The key to our continued growth and success while others have come and gone is due in no small part to our ability to adapt to and lead change in this market. The stats below demonstrate this.

Below are the data from over 43 million orders executed through FXCM over a twelve month period from September 2013 through August 2014. In that year alone, FXCM clients benefited from over $21 million in positive slippage.

  • 76.2% of all orders had no slippage.
  • 13.5% of all orders received positive slippage.
  • 10.2% of all orders received negative slippage.
  • Over 58% of all limit and limit entry orders received positive slippage.
  • 52% of all stop and stop entry orders received negative slippage.

Note how FXCM clients receive positive slippage more frequently than negative slippage. That's due in part to the Market Range and Range Entry order types on our Trading Station platform that allow clients to specify the amount of negative slippage they are willing to accept on market and pending orders respectively. These unique order types allow FXCM clients to limit their negative slippage while still receiving the full benefits of any positive slippage that's available in the market.


* As of the latest publicly available data from December 2015
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Old Jan 28, 2016, 9:51pm   #9
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Hi Jason

Impressive stats etc and nice to know you believe you are at the cutting edge in terms of adapting and leading change in this market.

That worries me ;-)

Ok so you been caught in the past by half blind regulators and your company and others like CMC etc are now trying to look like "knights in shining armour" etc etc to win all those traders of the past back.

We all know clever marketing stats can convince people that black is now white and all is well etc etc

I am sure you are not the only company who have found other "edges" that favour the brokers and good luck to you - but even your stats seem funny

ie Approx half a million a day from retail traders - so thats easy 120 -130 million per annum

Why do you then show us stats for a year on just 43 million orders - are they the cherry picked ones ??

Sorry to have to say Jason - FXCM is probably no worse than many other brokers in the markets - but you can only bluff some of the people some of the time - and not everyone = all of the time

A very skeptical FX retail trader of 13 years plus
Regards


F

Last edited by Forexmospherian; Jan 28, 2016 at 10:07pm. Reason: spelling
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Old Jan 28, 2016, 10:03pm   #10
Joined Sep 2011
good point on the 43 million. surely some mistake?
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Old Jan 28, 2016, 11:03pm   #11
 
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Originally Posted by gerryg View Post
The question is what is your LOT SIZE? Slippage depends mostly on lot size, if its big enough you'll get slippage with any broker for sure.
Open 2-3 more accounts with other brokers like Нotforex and FXCM and launch your software there with proportionally smaller lots and thus slippage.
A Way to go !
I will use an example with the GBP/USD. Unless you are an institutional investor trading >1,000,000 GBP per trade, then your lot size is far from too big. Your lot size is most likely too small. You most likely do not have access interbank rates. Trades with less than a certain amount will be re-routed to odd lots. The slippage in time is most likely due to the fact that they have up to five seconds to hold your order and wait for a better price and then arbitrage the difference and sell you their holdings instead. The 1.5 seconds average that you describe is probably how long it takes their system to check their holdings and/or wait to arbitrage your order.

Most providers are selling you their holdings instead of giving you direct access even though they claim to do so.

This means that you could buy 1,000,000 EUR/USD instantaneously at the best price and up to 26,700,000 EUR/USD at a whack.
Click the image to open in full size.
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Last edited by hhiusa; Jan 28, 2016 at 11:35pm.
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Old Jan 29, 2016, 9:38pm   #12
 
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Originally Posted by Forexmospherian View Post
We all know clever marketing stats can convince people that black is now white and all is well etc etc
Hi Forexmospherian,

In fact, you will find that few forex brokers publicly share execution data. FXCM is proud of our execution stats specifically because they highlight the fact that our clients receive positive slippage more frequently than negative slippage. For this reason, I'm happy to address the concerns you raised.

Quote:
Originally Posted by Forexmospherian View Post
your stats seem funny

ie Approx half a million a day from retail traders - so thats easy 120 -130 million per annum
To clarify:
  • The figure quoting the 501,108 retail client trades executed by FXCM per day is from our December 2015 volume metrics.
  • The figure quoting over 43 million orders executed through FXCM is from a twelve-month period from September 2013 through August 2014.

Quote:
Originally Posted by Forexmospherian View Post
Why do you then show us stats for a year on just 43 million orders - are they the cherry picked ones ??
The orders are not cherry picked and include all forex trades, we executed for retail clients during the period in question. The data also include trades for metals which we had already introduced at that time.

To explain, below is a quote from a post I made in February 2014, when we first published execution stats:

Quote:
Originally Posted by Jason Rogers View Post
Analyzing a total of 43,128,901 forex and metal trades executed by FXCM during the six month period of August 2013 -January 2014, 6,391,641 or 15% of the trades benefitted from price improvements totaling $15,726,247. Of the total number of trades executed, 4,648,672 trades were limit and limit entry orders. Sixty percent of those limit and limit entry orders were positively slipped providing clients $7,296,520 in price improvements. Of the total trades executed in the six month period of August 2013 - January 2014 clients were executed at their requested price 73% of the time with no slippage. Only 12% of orders were slipped negatively. As mentioned before, FXCM is currently one of the only firms in the industry to give price improvements on market and limit orders.

As you can see above, the original execution study covered a 6-month period from August 2013 to January 2014, and I quoted the exact number of trades executed: 43,128,901. That's all the data we had collected at the time of my earlier post.

As time went on, we had enough data to provide stats for a full year and updated the percentages as shown below. However, instead of quoting an exact number of trades executed, I started saying "over 43 million" to cover the additional six months. I apologize for any confusion that caused, but I hope you can see it was not intentional.

Quote:
Originally Posted by Jason Rogers View Post
Below are the data from over 43 million orders executed through FXCM over a twelve month period from September 2013 through August 2014. In that year alone, FXCM clients benefited from over $21 million in positive slippage.

  • 76.2% of all orders had no slippage.
  • 13.5% of all orders received positive slippage.
  • 10.2% of all orders received negative slippage.
  • Over 58% of all limit and limit entry orders received positive slippage.
  • 52% of all stop and stop entry orders received negative slippage.

Quote:
Originally Posted by Forexmospherian View Post
A very skeptical FX retail trader of 13 years plus
You could have fooled me!

In all seriousness though, thank you for sharing your concerns here and giving me the opportunity to address them. If you have any other questions about FXCM, please let me know.

Thanks,
Jason
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Old Jan 29, 2016, 11:57pm   #13
 
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Originally Posted by Jason Rogers View Post
Hi Forexmospherian,

In fact, you will find that few forex brokers publicly share execution data. FXCM is proud of our execution stats specifically because they highlight the fact that our clients receive positive slippage more frequently than negative slippage. For this reason, I'm happy to address the concerns you raised.

Thanks,
Jason
@Jason Rogers

Everyone seems to be ignoring the elephant in the room.

Why would any trades have any slippage at all? I must be misunderstanding the idea of slippage.

I am currently with Interactive Brokers. They have forex trade minimums. Their margins rates are close to the best that I have seen. According to the picture below, FXCM and many other have spread markups whereas IB does not. Would you care to explain that to me? Additionally, how big are your average trade sizes from your clients? Placing an order below a certain size will cause it to be re-routed to odd lots.

Click the image to open in full size.
Click the image to open in full size.
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Old Feb 1, 2016, 7:05pm   #14
 
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Originally Posted by hhiusa View Post
Why would any trades have any slippage at all? I must be misunderstanding the idea of slippage.
Great question!

On our No Dealing Desk (NDD) forex execution model, FXCM offsets each of your orders individually with the best prices available from competing liquidity providers. The key point here is that FXCM does not take the market risk on the other side of your trade. That means we can only fill your order at a price that is available in the market.

Slippage occurs when the price you requested is no longer available. There are a couple of factors that are the most likely cause of slippage:
  1. Liquidity: the quantity of an asset that is available for trading at a certain price. Liquidity can be exhausted by orders that arrive before yours in the queue resulting in your order getting filled at the next best price. This is especially true during times of low liquidity such as a news event, which is why slippage is more likely to occur at these times.
  2. Latency: the time lag between when your order is placed and when it executes. Latency can sometimes be reduced by running your trading platform on a virtual private server (VPS) that is co-located with our servers.
While slippage is a risk when trading in any financial market whether it's equities, futures or forex, it's worth noting that, with FXCM, slippage can be either positive or negative. Positive slippage is when your order is filled at a better price, while negative slippage is when your order is filled at a worse price. Positive slippage is more likely with limit orders, while negative slippage is more likely with stop orders. That's due to the momentum of price movement when such order types are triggered.

As mentioned in my previous post, FXCM clients experience slightly more positive slippage than negative slippage overall. That's due in part to tools available on our platforms such as "Market Range" and "Range Entry" which allow our clients to specify the amount of negative slippage they are willing to accept on market orders and entry orders respectively.

For example, if I place a stop entry order to buy EUR/USD at 1.0900 with a Range Entry of 2 pips, then that order will only get filled if the price available in the market is 1.0902 or lower. Otherwise the order will get cancelled to prevent unwanted negative slippage.

Note that FXCM's Market Range and Range Entry tools only prevent negative slippage. They allow you to receive the full benefits of any positive slippage that's available in the market. That means the stop entry order I described above could get filled at 1.0897 (with 3 pips of positive slippage) if that price was available.

Quote:
Originally Posted by hhiusa View Post
I am currently with Interactive Brokers. They have forex trade minimums. Their margins rates are close to the best that I have seen. According to the picture below, FXCM and many other have spread markups whereas IB does not. Would you care to explain that to me?
Unfortunately, the information your current broker gave you about us is incomplete.

While FXCM offers traders the option of a Mini account which you can open with as little as $50, our Standard account has a 2k opening minimum. Our Mini accounts have all inclusive spreads, because no separate commission is charged. Our Standard accounts have no markups to the forex prices we receive from liquidity providers, because we charge a separate commissions just like your current broker.

The graphics they gave you suggest that differences in client profitability are due to spread markups, when in reality they have more to do with differences in average account balances.

What you're seeing here is how the leverage you use and the amount of capital in your trading account can affect your profitability. I mentioned this in an earlier discussion about trader profitability with data compiled by DailyFX research from over 10,000 FXCM client accounts: "Traders with at least $5,000 of capital tend to use more conservative amounts of leverage. Traders should look to use an effective leverage of 10-to-1 or less."

Click the image to open in full size.

The graphic above shows the profitability of FXCM clients in three account balance ranges: less than $1000, between $1000 and $4999, and between $5000 and $9999. The same study showed that FXCM client accounts with a balance of $10,000 or more had a profitability rate of 44.09%. That's right in line with the data from your screenshot, since IB has a minimum balance for their accounts of $10,000. They must have forgotten to mention that fact in their ads.

Quote:
Originally Posted by hhiusa View Post
Additionally, how big are your average trade sizes from your clients?
The latest publicly available metrics show that FXCM retail clients placed an average of 501,108 trades per day in December 2015 at an average volume of $14.7 billion per day. That equates to an average retail trade size of just over 29k or 29 micro lots.

Quote:
Originally Posted by hhiusa View Post
Placing an order below a certain size will cause it to be re-routed to odd lots.
While that might be a limitation with your current broker, FXCM offers competitive NDD pricing on orders as small as 1k (one micro lot or 1000 currency units).
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Old Feb 1, 2016, 8:12pm   #15
 
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@Jason Rogers

Posting information that I can find myself is not helpful. You still have not answered my questions.

How can you honestly be providing access to interbank rates to people with so little equity without essentially unloading your own positions to customers. It does sound like direct access to me. Your explanations sound like double speak. Markups are markups. It should not matter how much a client has in their account.

There should never be an issue with liquidity. The picture I posted earlier shows EUR/USD having an availability of 1,000,000 @ 1.09404. If I click that price on the deep book window, it instantly transmits and is filledat that price, no exceptions. If I am quick enough to click on that price, then it is filled at price.

Latency also should not be an issue if you have direct market access.

This is why I was asking about slippage.

Click the image to open in full size.
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