Cash or Future

[Market Wizard]

A fellow trader emailed me this following article about currency futures. It makes interesting reading .

It also got me thinking about changing my current broker.

I am currently with CMC and GNI and am thinking of switching to Interactive.

Does any one have any experience of trading forex with IB with no spread and just a $6 or $12 commission for a round turn ? These type of savings are great but is there another cost to it?

Any other brokers who may offer the similar service?

Any advice and comments appreciated.

Thanks

 

[Rhody Trader]

Does any one have any experience of trading forex with IB with no spread and just a $6 or $12 commission for a round turn ? These type of savings are great but is there another cost to it?

Any other brokers who may offer the similar service?

Firstly, understand that just because you go with what is referred to as a "dealing desk" broker, which basically means one not acting as a market maker in their own right, doesn't mean you suddenly get away from the spread. It's always there. It's just that the marketing making brokers generally have fixed spreads and the pass-through brokers like IB expose you to the constantly fluctuating market spread, which sometimes tighter and sometimes wider. So before you start thinking you're saving loads of money, be sure to know what you're getting into.

As for similar services, you're basically asking about ECNs, of which there are several. I'm sure others will be happy to provide some advice on that. I used IB a while back and was not at all pleased with their forex set-up. It might be different now, though.

 

[Market Wizard]

Thank you for your post RT.

I remember when I first started trading FTSE future with IB about 7 years ago, my experience was that the futures markets was far more volatile and faster than cash.

Is that the same with trading currency futures through an ECn as compared to someone like CMC, where the order flow is quite steady?

I will look up other ECN's and see what they offer.

 

[Trader333]

I used IB a while back and was not at all pleased with their forex set-up.

What did you not like about the IB set up ?


Paul

 

[Bagehot]

Need to be clear whether we're talking about IB (ie CME) forex futures on this thread, or IB's ECN forex offering. My understanding is that the thread is about the former.

I've never traded forex exclusively, but always as part of a portfolio of other 'commodities'. Consequently, it was easier for me to trade the futures on the one account rather than having a seperate cash forex broker. Having done it I would well recommend it - massive liquidity, a 'proper' market with full visibility on market depth, etc. The article is interesting, and I can concur with the positive comments made on the advantages of futures, if not, through lack of experience, the negative comments on the cash markets. But as Rhody Trader says, you need to be careful on spread: usually no more than a pip, but this can widen a lot around news-releases, etc.

 

[Rhody Trader]

What did you not like about the IB set up ?

No position by position p&l figures was one - while if I had a futures, stock, or option position on I could see where individual positions were just fine. The other was the fact that when I closed my positions most of the time they didn't totally close. I'd still have some little currency balance leftover.

 

[Rhody Trader]

I remember when I first started trading FTSE future with IB about 7 years ago, my experience was that the futures markets was far more volatile and faster than cash.

Is that the same with trading currency futures through an ECn as compared to someone like CMC, where the order flow is quite steady?

I'm not sure how you're comparing futures and cash in terms of the FTSE. It doesn't seem likely to me that the arbs would allow the futures and the index to get too far out of line.

As for forex, I've generally seen no difference in speed or volatility between futures and spot markets.

 

[Market Wizard]

Thank you for all your reples.They have all been very helpful.

I'm not sure how you're comparing futures and cash in terms of the FTSE. It doesn't seem likely to me that the arbs would allow the futures and the index to get too far out of line.

I used to take positions in the Future based on analysis done in the cash market. Because the future was always ahead, though led by the cash, slippage was present.