Spread betting at FXCM

[Jason Rogers]

Hi Jason Rogers,

Thanks for the update. I guess it didn't make sense to see Pip Cost on the right of the rollover costs. It should, of course, be on the left of Roll S!

By the way, is it possible to move/drag the columns around on Trading Station in the Dealing Rates window (desktop AND web) to suit the individual trader.

Thanks.

LBP

There's no drag/drop functionality, but it's a good idea. I'll add it to the suggestion list for our developers.

Jason

 

[hursta55]

There's no drag/drop functionality, but it's a good idea. I'll add it to the suggestion list for our developers.

Jason

Hi Jason,

I have looked at your spreads at FXCM and they seem quite high , for example 2.5 on EUR/USD ?

Could you explain this ?

 

[Jason Rogers]

Hi Jason,

I have looked at your spreads at FXCM and they seem quite high , for example 2.5 on EUR/USD ?

Could you explain this ?

Hi hursta,

Welcome to the FXCM thread and I'm happy to help. FXCM receives prices from 10+ liquidity providers, and the best bid/ask price is streamed onto our platform with a mark-up. The mark-up is FXCM's compensation (or commission) when you place a trade. So the spreads are variable based on pricing being received from liquidity providers rather than FXCM controlling the spread and making a market as other brokers may do.

For traders looking for tighter spreads, we have the Active Trader program which offers a combination of tighter spreads plus a commission. The overall transaction cost is designed to be about a pip tighter for the active trader program, and commission can go down as your trading volume increases. Traders need to have either a minimum $50,000 account deposit or 10 million per month in notional trading volume to qualify.

Spreads are one component of picking a broker along with customer support, execution quality, platform, charting, resources, etc.

Jason

 

[Ross Spur]

Hi hursta,

Welcome to the FXCM thread and I'm happy to help. FXCM receives prices from 10+ liquidity providers, and the best bid/ask price is streamed onto our platform with a mark-up. The mark-up is FXCM's compensation (or commission) when you place a trade. So the spreads are variable based on pricing being received from liquidity providers rather than FXCM controlling the spread and making a market as other brokers may do.

For traders looking for tighter spreads, we have the Active Trader program which offers a combination of tighter spreads plus a commission. The overall transaction cost is designed to be about a pip tighter for the active trader program, and commission can go down as your trading volume increases. Traders need to have either a minimum $50,000 account deposit or 10 million per month in notional trading volume to qualify.

Spreads are one component of picking a broker along with customer support, execution quality, platform, charting, resources, etc.

Jason

You keep saying this, but it's plain to everyone here that FCXM's spreads on some major markets are uncompetitive. It's a cruel spreadbetting world, so even if your execution and platform were the best, most punters will be put off.

 

[tar]

, most punters will be put off.

I am not sure about that , check FXCM's revenue numbers and volumes it is higher than any competitor you are talking about and its getting higher and higher , seems punters dont care about spreads

 

[lilbitpipsy]

...so even if your execution and platform were the best, most punters will be put off.

...seems punters dont care about spreads

In all fairness, whether the higher spreads from FXCM hurt your trading or not is dependent on a number of factors such as trading style, volume per month etc. I guess if you are a lower volume scalper or daytrader, then the spreads will probably be unattractive. Conversely, if you are a swing/position trader, than the spreads are mostly irrelevant unless they are massively different from the liquidity provider's rates. Traders who favour the latter usually place a greater emphasis on platform, execution, support (when things go wrong) etc. I guess that's why there are so many brokers, because none of them do everything exactly as you would like!

LBP

 

[lilbitpipsy]

Take a look at the attached image for the location of the overnight lending rates. It's towards the bottom of the webpage on the right hand side of DailyFX - Forex News, Currency Trading, FX News, Forex Trading News.

Hi Jason Rogers,

Where can I find the overnight rates of the other currencies in FXCM's FX portfolio apart from those eight on the dailyfx.com main page?

Also, are there any plans to expand the amount of currencies that are tradable on FXCM, such as:

Chinese Renminbi (CNY)
Brazilian Real (BRL)
Indian Rupee (INR)

These three are probably the most glaring omissions for me. :-0

Thanks.

LBP

 

[Ross Spur]

I am not sure about that , check FXCM's revenue numbers and volumes it is higher than any competitor you are talking about and its getting higher and higher , seems punters dont care about spreads

But is that for SB or ordinary FX?

 

[Jason Rogers]

Hi Jason Rogers,

Where can I find the overnight rates of the other currencies in FXCM's FX portfolio apart from those eight on the dailyfx.com main page?

Also, are there any plans to expand the amount of currencies that are tradable on FXCM, such as:

Chinese Renminbi (CNY)
Brazilian Real (BRL)
Indian Rupee (INR)

These three are probably the most glaring omissions for me. :-0

Thanks.

LBP

Hi LBP,

For additional overnight rates, you would probably need a Bloomberg terminal, or you may be able to find it on major financial news websites.

Some countries have capital controls which restricts forex trading in their currencies. The CNY, BRL, and INR are some of those. Brokers offering trading in these pairs are likely acting as the market maker.

If the pairs became freely floating without any restrictions, say the CNY, then there would be the possibility of offering it on the platform.

-Jason

 

[lilbitpipsy]

Some countries have capital controls which restricts forex trading in their currencies. The CNY, BRL, and INR are some of those. Brokers offering trading in these pairs are likely acting as the market maker.
-Jason

Hi Jason Rogers,

That explains a lot, pity though. Any plans to introduce any more currency pairs that I didn't mention. More choice is always welcome.:cheesy: Also, why do the available FX pairs differ on the website page FXCM and the downloadable spread betting guide at http://www.fxcm.co.uk/docs_pdfs/spread-betting_product_guide.pdf. Which one is correct, if any?

On another note, do FXCM offer guaranteed stops (free or otherwise).

Thanks.

LBP

 

[Jason Rogers]

Hi Jason Rogers,

That explains a lot, pity though. Any plans to introduce any more currency pairs that I didn't mention. More choice is always welcome.:cheesy: Also, why do the available FX pairs differ on the website page FXCM and the downloadable spread betting guide at http://www.fxcm.co.uk/docs_pdfs/spread-betting_product_guide.pdf. Which one is correct, if any?

On another note, do FXCM offer guaranteed stops (free or otherwise).

Thanks.

LBP

Hi LBP,

I believe the next pair we plan to add to the platform should be USD/ILS (Israeli Shekel) possibly going live in the next month or so. The website lists the most commonly traded pairs available, and the spread betting guide you linked to contains the entire list of available pairs.

FXCM does not offer guaranteed stops for forex transactions. Remember from the previous example that orders are filled dependent on liquidity. Since FXCM is not providing liquidity or making the market, we cannot determine whether an order is filled at the stop loss order price or the next best available price. All orders with FXCM can experience positive or negative slippage dependent on liquidity.

-Jason

 

[TheNovice]

Hi LBP,

I believe the next pair we plan to add to the platform should be USD/ILS (Israeli Shekel) possibly going live in the next month or so. The website lists the most commonly traded pairs available, and the spread betting guide you linked to contains the entire list of available pairs.

FXCM does not offer guaranteed stops for forex transactions. Remember from the previous example that orders are filled dependent on liquidity. Since FXCM is not providing liquidity or making the market, we cannot determine whether an order is filled at the stop loss order price or the next best available price. All orders with FXCM can experience positive or negative slippage dependent on liquidity.

-Jason

What about GER30 ? Is that a market generated by FXCM, and therefore, I am trading against FXCM? Where do you get the price from and what is the formula for fair value?

Thanks

 

[lilbitpipsy]

...All orders with FXCM can experience positive or negative slippage dependent on liquidity.
-Jason

Hi Jason Rogers,

I take it that applies to both entry and exit unless you use a "Market Range" entry for price certainty? Do stops (normal and trailing stops work on the "At Best" principal then, after the price crosses the initial stop threshold?

Another thing I forgot to ask...is it possible to hedge your own trades by creating an order for the other side. If so, how does this impact FXCM's strategy to automatically hedge trades?

And another , with regard to the margin rates, how does this relate to bets per pip in spread betting. For instance, in the FXCM guide I outlined in a previous post, it says the MMR (Minimum Margin Rate) for...let's say AUD/CAD (the first in the list), the MMR is 40GBP, which is supposed to relate to a lot size of 10000. Does that mean if you bet on AUD/CAD at £1 per pip? If so, then a bet of £10 per pip would require a MMR of £400? Am I getting this right? Also, why is it called Minimum Margin Rate? Does it change based on certain factors? If so, what would cause the margin rate to change?

Following on from that, I noticed that some of the currency pairs require around 4-6 times more margin per 10000 lot. Is that solely down to liquidity in that market, or are there other factors involved?

Thanks for all you help so far.

LBP

 

[Jason Rogers]

What about GER30 ? Is that a market generated by FXCM, and therefore, I am trading against FXCM? Where do you get the price from and what is the formula for fair value?

Thanks

Hi Novice,

NDD execution applies to forex transactions. While there are no re-quotes for cfd's on gold, oil, and stock indices, FXCM does manage the risk for these transactions and make the market. Our goal originally when launching cfd's was to have it NDD as well, but traders requested a lower lot size than what was traded on exchange so the orders could not be offset one for one. The same was true when we originally started offering micro lots for forex trading. There were only a couple of banks offering NDD forex execution for micro lots, so we offered it separately through FXCM Micro where FXCM made the market. That changed a few years ago and micro lots were transitioned fully to NDD. If there came a point in the future where we could do the same for cfd's you may see the same happen.

The pricing for each product is based on the value of the product on the underlying exchange. If you look at the FAQ page, there is a box on the right hand side that lists the underlying product. Information about fair value, finance charges, and more can be found in the product guide http://docs.fxcorporate.com/user-guide/ug-cfd-product-guide-ltd-en.pdf, cfd FAQ's and the support team can help with any questions beyond this.

Jason

 

[Jason Rogers]

Hi Jason Rogers,

I take it that applies to both entry and exit unless you use a "Market Range" entry for price certainty? Do stops (normal and trailing stops work on the "At Best" principal then, after the price crosses the initial stop threshold?

Another thing I forgot to ask...is it possible to hedge your own trades by creating an order for the other side. If so, how does this impact FXCM's strategy to automatically hedge trades?

And another , with regard to the margin rates, how does this relate to bets per pip in spread betting. For instance, in the FXCM guide I outlined in a previous post, it says the MMR (Minimum Margin Rate) for...let's say AUD/CAD (the first in the list), the MMR is 40GBP, which is supposed to relate to a lot size of 10000. Does that mean if you bet on AUD/CAD at £1 per pip? If so, then a bet of £10 per pip would require a MMR of £400? Am I getting this right? Also, why is it called Minimum Margin Rate? Does it change based on certain factors? If so, what would cause the margin rate to change?

Following on from that, I noticed that some of the currency pairs require around 4-6 times more margin per 10000 lot. Is that solely down to liquidity in that market, or are there other factors involved?

Thanks for all you help so far.

LBP

Hi LBP,

You can set the market order type to Market Range or At Market for both the open and close order. Simply choose the order type in the open and close order window. A stop loss order will always be executed as an At Market order once your stop price is reached, and the order will fill at the best price available dependent on liquidity.

Hedging, meaning to have a long and short position open at the same time, is possible on FXCM UK's platform, and the same NDD forex execution would result on both orders. Every forex trade is offset one for one with one of the liquidity providers regardless of whether the order is a buy or a sell transaction.

MMR will display the minimum margin requirement for the minimum lot size for that particular symbol. If you're trading the GBP/USD in a GBP denominated account, the minimum margin requirement for a 1k position is £5. If you trade a 2k position, the margin requirement is £10. If you trade a 10k position, the margin requirement is £50, and so forth. So you are setting aside £ for every 1k traded. The order window will automatically display the margin requierment (listed as Usd Mr and pip value (listed as Per Pip) for the trade size you have selected.

The margin is based on the notional position size being traded. Let's go through an example. The margin requirement is 0.5% for most of the currency pairs. If you are trading a 1k position in GBP/USD, that means you are trading a notional position size of £1,000. A 0.5% margin requirement means you have to set aside 0.5% of that £1,000 position which is £5. GBP/USD is an easy one since your notional trade size is in GBP and your account denomination is also in GBP making this constant. This is true for any currency pair that starts with GBP as the first currency.

For any currency pairs that do not have the GBP as the base currency, the margin amount has to be converted into GBP at the current exchange rate which can fluctuate. This is why margin requirements can vary by currency pair and by account denomination.

Jason

 

[lilbitpipsy]

MMR will display the minimum margin requirement for the minimum lot size for that particular symbol. If you're trading the GBP/USD in a GBP denominated account, the minimum margin requirement for a 1k position is £5. If you trade a 2k position, the margin requirement is £10. If you trade a 10k position, the margin requirement is £50, and so forth. So you are setting aside £ for every 1k traded. The order window will automatically display the margin requierment (listed as Usd Mr and pip value (listed as Per Pip) for the trade size you have selected.

The margin is based on the notional position size being traded. Let's go through an example. The margin requirement is 0.5% for most of the currency pairs. If you are trading a 1k position in GBP/USD, that means you are trading a notional position size of £1,000. A 0.5% margin requirement means you have to set aside 0.5% of that £1,000 position which is £5. GBP/USD is an easy one since your notional trade size is in GBP and your account denomination is also in GBP making this constant. This is true for any currency pair that starts with GBP as the first currency.
Jason

Hi Jason Rogers,

Thanks for the confirmation on the stops and hedging front. I just need a little clarification on the how the Per Pip value relates to Amount (K) and Usd Mr.. By the way, in the FXCM spread betting guide it states:

3.5 Minimum Margin Requirements (MMR)

FXCM Margin Rates are displayed in the dealing rates window on the Trade Station and detail the client's capital obligation to buy or sell 1 contract of a single index. FXCM has standardised minimum/incremental trade sizes for each instrument. To calculate the margin required to place the minimum trade size, simply multiply the minimum trade size by the margin required (per contract) which is displayed in the dealing rate.

- Minimum trade size is 10,000 base currency units. Eg. 10,000 EUR/USD, 10,000 GBP/USD
- MMR is detailed in the table per 10,000 units

So I guess on the spread betting platform you can only trade a minimum of 10k notional and up. My question is this; in the Market Order window on Trade Station you have the following:

Amount (K) / Per Pip / Usd Mr.

I'm assuming you can't edit the Per Pip value directly, so if you increase Amount (K) to 50K, that would then automatically increase the Per Pip and Usd Mr. five fold. So the Per Pip value is fixed to Amount (K) and can't be changed independent of this (eg. you can't bet 5 per pip on a 10K amount). I hope I'm getting this right!

Thanks again.

LBP

 

[Jason Rogers]

Hi Jason Rogers,

Thanks for the confirmation on the stops and hedging front. I just need a little clarification on the how the Per Pip value relates to Amount (K) and Usd Mr.. By the way, in the FXCM spread betting guide it states:

3.5 Minimum Margin Requirements (MMR)

FXCM Margin Rates are displayed in the dealing rates window on the Trade Station and detail the client's capital obligation to buy or sell 1 contract of a single index. FXCM has standardised minimum/incremental trade sizes for each instrument. To calculate the margin required to place the minimum trade size, simply multiply the minimum trade size by the margin required (per contract) which is displayed in the dealing rate.

- Minimum trade size is 10,000 base currency units. Eg. 10,000 EUR/USD, 10,000 GBP/USD
- MMR is detailed in the table per 10,000 units

So I guess on the spread betting platform you can only trade a minimum of 10k notional and up. My question is this; in the Market Order window on Trade Station you have the following:

Amount (K) / Per Pip / Usd Mr.

I'm assuming you can't edit the Per Pip value directly, so if you increase Amount (K) to 50K, that would then automatically increase the Per Pip and Usd Mr. five fold. So the Per Pip value is fixed to Amount (K) and can't be changed independent of this (eg. you can't bet 5 per pip on a 10K amount). I hope I'm getting this right!

Thanks again.

LBP

In the default setup for the platform, you can modify the pip/per point value by changing the trade size. The trade size directly impacts the value of the pip. So if you wanted each pip to be worth 5, you would need to trade 50k instead of 10k.

We understand that most spreadbet traders are more used to determining trade size based on GBP/point which is why the Trading Station platform has the option for you to choose the pounds per point on the trade rather than the notional trade size. Here's what it looks like in the order window when the option is set to GBP/point:

You will scroll or type in the GBP/point you want, and the margin requirement will automatically update based on the GBP/Point chosen.

The GBP/Point view in the order window is not the default setup, so you will need to change the setting in the options menu. To do this, goto the top left of the platform and click on System > Options. In the window that appears, select General Trading from the menu and change the Amount Mode to Currency/Point Trade. Below is a screenshot of the options window and what to click on.

-Jason

 

[lilbitpipsy]

You will scroll or type in the GBP/point you want, and the margin requirement will automatically update based on the GBP/Point chosen.
-Jason

Hi Jason Rogers,

Thanks for pointing out the possibility of changing the way you can adjust the GBP/Point value. I have just one more quick question...for now.

I am assuming when you increase the GBP/Point value, it will jump to the next available value based on the minimum 10K notional size. So for a currency pair where you can bet £1 per pip for each 10K notional, it will go up to 2, 3, 4 etc. So you would be increasing notional to 20K, 30K, 40K. You can't, for example, bet £2.5, £7.5 etc. per pip in this situation?

Oh, I forgot! :innocent: I downloaded the Trading Station II User Guide from http://support.fxcm.com/wp-content/downloads/FX_Trading_Station_User_Guide.pdf. I was hoping to find out what various settings were available for tweaking, such as the one you just pointed out. But, there was no information regarding this. Is there a more in-depth guide/manual on Trading Station II, preferably available in PDF format, that I can download.

Thanks.

LBP

 

[Jason Rogers]

Hi Jason Rogers,

Thanks for pointing out the possibility of changing the way you can adjust the GBP/Point value. I have just one more quick question...for now.

I am assuming when you increase the GBP/Point value, it will jump to the next available value based on the minimum 10K notional size. So for a currency pair where you can bet £1 per pip for each 10K notional, it will go up to 2, 3, 4 etc. So you would be increasing notional to 20K, 30K, 40K. You can't, for example, bet £2.5, £7.5 etc. per pip in this situation?

Oh, I forgot! :innocent: I downloaded the Trading Station II User Guide from http://support.fxcm.com/wp-content/downloads/FX_Trading_Station_User_Guide.pdf. I was hoping to find out what various settings were available for tweaking, such as the one you just pointed out. But, there was no information regarding this. Is there a more in-depth guide/manual on Trading Station II, preferably available in PDF format, that I can download.

Thanks.

LBP

Something I forgot to point out in the previous post is that lot sizes as small as 1k are now available. I believe we are in the process of updating the website to reflect this since the option was recently added. So you can specify the £/point as small as £0.06 increments. If you entered a £/point of £0.10, the platform would not be able to do this since the trade size would be in between 1k and 2k. In these situations, the trade size will be rounded down to the nearest available lot size which would be 1k in this scenario.

The website you pointed out is the most in-depth guide we have available, but the options window will list a brief description of the option selected. Take a look at the image below as an example. I clicked on "History Size", and the description at the bottom explains that this option controls the maximum number of trades that will appear in the closed positions window.

This is extent of the written information available, but we're always happy to explain beyond what's in the user guide and options definitions.

Jason

 

[lilbitpipsy]

Something I forgot to point out in the previous post is that lot sizes as small as 1k are now available.

The website you pointed out is the most in-depth guide we have available...

This is extent of the written information available...
Jason

Hi Jason Rogers,

I guess that means, thanks to the 1K increments, you can bet in pretty varying sizes per pip now. :clap: It will probably be a boon for anyone who uses tight money management rules, not to mention smaller traders etc.

It's strange that there is no in-depth manual for TSII, as it's far easier to find something in a manual than a click and see strategy (not conducive for good trading either). :cheesy:

By the way, with regard to spread betting indices, I noticed that FXCM (and probably other brokers) are using Equity Index CFD's like GER 30 etc. instead of allowing traders to bet on their actual index counterparts like the DAX in this case. Could you tell me if the Equity Index CFD's used are correlated to their actual index counterparts. Some of the indices, like the GER 30 I mentioned, are hard to find information on, as I think it's always wise to be able corroborate prices/charts etc. with 2nd and possibly 3rd sources.

Thanks,

LBP