Spot 'v' Futures

[GotGold]

I know this topic has been debated many times but it is impotant to any FX trader, so here it is again.

Can anyone answer these questions?

On futures, asuming a $100,000 trade, would the spread (1-2 p on E/$) + the commission (approx $18 round turn) would be equal to a 3pip spot trade costing? That is unless you are trading more than $100,000 lots then value would increase.

Are there charges for stopps and limits on futures?

 

[JTrader]

Hi GotGold

as far as I am aware -

One CME Globex futures EUR/USD contract is equal to buying 125,000 EUR with USD - 12.5 per pip.

The commission with IB is something like $5-6 per round turn.

The spreads during normal trading hours are usually 1 pip. Even if the spreads were two pips it would only be like a 2.5 pip spread in total.

Please correct any of my information if it is incorrect.

Cheers

jtrader.

 

[GotGold]

Good information thanks...
More questions ...

R IB the cheapest?
R there charges for stops/limits?

 

[JonnyT]

No charge for Stop Limits.

IB charge $3 per contract. i.e. if you bought 1 contract then sold that contract IB would charge $6

Remember its $12.5 per pip on the EUR and the spread is 1

JonnyT

 

[GotGold]

Sounds good guys.
Time to look into IB.

 

[donaldduke]

Be aware that Futures can spike, GBP spikes more the EUR, but EUR can get out of wack too,
the Futures are arbed against the Cash but some times around news events they can move out of line by
10-20 pips!!!

For example a few weeks ago around news the cash went down to 93 cents (i dont recall the big figures)
but the futures went down further to 83. Then both markets took off hard to the up side.

Now if you had your stop at say 85 in the futures you would have gotton filled!

I still trade the futures rather than the cash, because i want a API to automate my trades and IB
have a nice one. Im prepared for the fact that futures can get out wack and i might get filled even though
the cash never went near that price.

EUR futures are still tradeable even if the do sometimes move out of line...

 

[GotGold]

Ok
Had a look at an E*trade demo. They were quoting$9.11 per side for FX futures. Thats 3 times as much as IB.

Wots going on here?

 

[JTrader]

Hi GotGold -

This sounds like a case of a plain and simple rip-off! - showing that it always pays to research and shop around and that a significant difference in the value for money offered by different brokers does exist.

The etrade website does state that you can trade Futures from GBP £4.95 per contract including all exchange fees - not sure if this is per side, or per round trip though.


etrades quote driven CFD platform package did not strike me as offering a better deal than their competitiors either.

jtrader.

 

[Moneycat]

I know this topic has been debated many times but it is impotant to any FX trader, so here it is again.

Can anyone answer these questions?

On futures, asuming a $100,000 trade, would the spread (1-2 p on E/$) + the commission (approx $18 round turn) would be equal to a 3pip spot trade costing? That is unless you are trading more than $100,000 lots then value would increase.

Are there charges for stopps and limits on futures?

I made the same calculations myself yesterday, just slightly from a different point of view: in futures you can trade 62500 or 125000 or multiples.

62500 is a mini EuroFx contract, usually the spread is between 2 and 3 pips. The spread is wider when the US traders sleep... Commissions, assuming 6 $, add another pip. so if you trade the mini you have total costs between 3 and 4 pips: Oanda has only 1.8 pips.

125000 (and multiples): that's the normal contract. spread is ususally 1 to 2 pips, commissions add half a pip. Total cost between 1.5 to 2.5 pips. Again Oanda has 1.8. I would say that the spread in the future is most of the time 1 pip, so it might be cheaper to trade the future.

Other futures? I might be wrong, but the Cable is a lot cheaper traded via futures than cash. Typical spot broker charges 4 ticks, whereas the future is usually half or less. The same is true for AUD, CAD and JPY.

Basically, spot spreads have gone meaningfully down ONLY in the EUR/USD, but are still quite high in the other crosses.

 

[JonnyT]

You cannot trade on Oanda at certain times and they whip the spread upto 10 pips.

The futures is a fair market and can be traded with a spread of 1 throughout UK and US hours.

No comparision for the EUR in my book.

JonnyT

 

[rwilliams]

You cannot trade on Oanda at certain times and they whip the spread upto 10 pips.

The futures is a fair market and can be traded with a spread of 1 throughout UK and US hours.

No comparision for the EUR in my book.

JonnyT

That's wrong (about Oanda, I cmean) - I trade at Oanda and you can trade 24/7. On the weekend the spread on EUR/USD is 10 pips, though. During the week it's mostly 1.8, but can be 2 outside EUR and USD sessions.

When the spread's 10 you wouldn't be trading anyhow - it's just a way of allowing you to exit a trade over the weekend if you _really_ have to. I've _never_ had positions open over the weekent, nor opened or closed trades then.

It's true that the spread widens around news events, though, at Oanda. They narrow again after a number of minutes depending on persistence of volatility. I don't trade through or around news, so I routinely get anything from 1 pip (on odd occasions) to 2 pips. As I said mostly 1.8.

Ron W

 

[JTrader]

Hi

Whether you trade spot or futures, I think, I think it is important to remember that you are trading 2 different markets. Whether or not the spot price becomes 10 pips out of line with the futures price is largely irrelevant - as they are two seperate markets - maybe a bit like comparing rugby league and rugby union. Sure, it is good to know that the futures can be/are more volatile around news times - and therefore one market may be more suitable to you than the other, but if you concentrate on your own market (say futures) why does it matter what the spot market is doing?

Cheers

jtrader.

 

[donaldduke]

Hi

Whether you trade spot or futures, I think, I think it is important to remember that you are trading 2 different markets. Whether or not the spot price becomes 10 pips out of line with the futures price is largely irrelevant - as they are two seperate markets - maybe a bit like comparing rugby league and rugby union. Sure, it is good to know that the futures can be/are more volatile around news times - and therefore one market may be more suitable to you than the other, but if you concentrate on your own market (say futures) why does it matter what the spot market is doing?

Cheers

jtrader.

It depends on the type of trading you do:

If one market spikes more and you will get stopped out slightly more often.
Now unless you buy and sell with limit orders you cant you use these spikes to advantage.

For example most Breakout systems use Stops for entries and Stops for losses and
take profits with stop/market orders (say at the close of the day or with a trailing stop etc)

In this case the fact that the futures market is more volatile will always work against you,
never in your favour. I doesnt happen that often but at the end of the year you might
net 10% less in net profits if you use such a system on the futures rather than the cash.
(assuming of course you can find a good Cash market broker)

 

[JTrader]

Oanda spread question

Originally posted by rwilliams -
That's wrong (about Oanda, I cmean) - I trade at Oanda and you can trade 24/7. On the weekend the spread on EUR/USD is 10 pips, though. During the week it's mostly 1.8, but can be 2 outside EUR and USD sessions.

Hi

how come Oanda are able to offer a 1.8 pip spread on EUR/USD - whereas for other retail spot forex brokers - the EUR/USD seems to be a uniform 3 pips? Are Oanda simply leading the way in the competition for tighter retail forex spreads?

What, if any, is the minimum position size with Oanda?

Also, why 1.8 pips - this seems a strange figure?

Thanks.

 

[JTrader]

Forex price conversion - mental block

Hi - I have another question.

is the EUR/USD really $12.5 per pip, or is it 12.5 Euros per pip?

My understanding is that -
Buying 10million EUR/USD = I am buying 10,000,000 EUROS with USD. (So 10,000,000 EUROS will cost 12,200,000 USD, @ EUR/USD = 1.2200 for example).
Buying 10million USD/JPY = I am buying 10,000,000 USD with JPY
Selling 10million GBP/CHF = I am selling 10,000,000 GBP getting CHF (in return).

Is my understanding correct? and is the EUR/USD really $12.5 per pip, or is it 12.5 Euros per pip?

Many thanks

jtrader.

 

[Carley1]

A brokerage house can quote you a pip spread, and even structure your trading platform to show that particular spread. In reality this is a world market in which banks transfer funds globally according to interbank rates. It is not feasible for an individual speculator to receive a discount on the spread, this would disrupt the entire system. In other words, even if a brokerage displays a discount pip spread you will likely not be filled according to the stated spread.

Thanks,
Carley

 

[JonnyT]

Hi - I have another question.

is the EUR/USD really $12.5 per pip, or is it 12.5 Euros per pip?

My understanding is that -
Buying 10million EUR/USD = I am buying 10,000,000 EUROS with USD. (So 10,000,000 EUROS will cost 12,200,000 USD, @ EUR/USD = 1.2200 for example).
Buying 10million USD/JPY = I am buying 10,000,000 USD with JPY
Selling 10million GBP/CHF = I am selling 10,000,000 GBP getting CHF (in return).

Is my understanding correct? and is the EUR/USD really $12.5 per pip, or is it 12.5 Euros per pip?

Many thanks

jtrader.

$12.5 per pip

You are buying $125,000 worth of Euros...

JonnyT

 

[JTrader]

$12.5 per pip

You are buying $125,000 worth of Euros...

JonnyT

Thanks JT -

therefore its a case of -

A) - with a 10million position in EUR/USD = I am buying $10,000,000 worth of Euros with USD.

and not a case of -

B) - with a 10million position in EUR/USD = I am buying 10,000,000 EUROS with USD. (So 10,000,000 EUROS will cost 12,200,000 USD, @ EUR/USD = 1.2200 for example).

:?: :?:

Cheers

jtrader.

 

[rwilliams]

Hi

how come Oanda are able to offer a 1.8 pip spread on EUR/USD - whereas for other retail spot forex brokers - the EUR/USD seems to be a uniform 3 pips? Are Oanda simply leading the way in the competition for tighter retail forex spreads?

What, if any, is the minimum position size with Oanda?

Also, why 1.8 pips - this seems a strange figure?

Thanks.

Oanda's spread on EUR/USD has been 2 pips for a long time. They've always had better spreads than the competition. 3 pips isn't any kind of 'standard' or anything - market-makers can quote what they like. Market forces will decide if they get any customers or not.

As regards the 1.8 pips, Oanda recently introduced what they call 'pipettes' - fractions of a pip. There's been quite a discussion on the Oanda message boards about this. Those who use limit orders don't like them, because the price usually still moves in whole pips, so they think it's a way for Oanda to crib the spread a little.

On market orders (which I almost always use) you get what you see. I'm happy with the lower spread - for the size I trade, it's cheaper to trade spot, as I'm not paying data fees this fees, that fees. Just the spread.

Ron W

 

[JTrader]

Thanks rwilliams .

are trade executions instant with oanda all of the time, or can they be delayed/requoted?

What is the minimum transaction size - if there is one?

Just had a look on "an" Oanda website and it mentions spreads of 2-3 pips on currency pairs. Please can you provide the web address of the oanda forex service that you are referring to?

Just to confirm - is Oanda a retail spot forex broker and not a direct market access, interbank, ECN type, spot forex broker?

Many thanks

jtrader.