Something Interesting in Financial Video February 2017
Gold prices fell on Wednesday as the Dow hit 20,000, among hopes that newly-elected U.S. President Donald Trump will unleash growth-friendly spending policies. Gold prices were trading solidly lower and back below the key $1,200 level in late-morning action Wednesday. 'Gold managed to tick up to the $1,218 level yesterday before the rally in the equity market ended the momentum,' said Peter Hug, global trading director for Kitco Metals. 'Capital may chase the print in the Dow, at the expense of protection. Euphoria, even though possibly misplaced, or at a minimum premature, will continue to increase the risk appetite for capital and prove a negative for gold,' he explained. Hug added that options expiration tomorrow may keep gold trading around the $1,200 print, but the pressure remains to the downside. The $1,197 level now becomes the support line, with $1,208 overhead resistance, he said.
- 2017.01.25
- www.youtube.com
High Frequency Trading
Dave Fry, founder and publisher of ETF Digest, and Steve Hammer, founder of HFT Alert, discuss high frequency trading operations, fundamentals, the difference between algorithmic trading and high frequency trading, fluttering, latency and the role high frequency trading had in the May stock market flash crash in 2010.
Scalping
All the ins and outs on scalping the Forex market. May Chris dives into the world of Scalping where he explains in great detail how this style of trading can be accomplished in the Forex market. This live webinar not only clarifies how a trader can scalp but also provides every Forex trader with a great guidance and extra tips.
This video provides an introduction to electronic communications networks (ECNs), systems that allow buyers and sellers of stocks to trade directly without an intermediary.
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Most forex
traders participate in the forex market with forex brokers. There are
mainly two types of forex brokers: market makers and electronic
communications networks (ECNs). In this article we want to introduce the
latter type of brokers, the ecn forex broker.
What is an ECN forex broker?
ECN forex broker is a financial expert that provides the clients with direct access to other forex participants in the currency market
by using electronic communications networks (ECNs). Unlike market
makers, which always trade against their clients to make profit, an ECN
forex broker only creates opportunities of trading between forex
traders.
How does an ECN forex broker work?
The ECN
forex brokers provide a medium by passing on the prices for different
market participants such as banks, market makers and other traders in
the market. Then the best bid/ask quotes will be displayed on the
trading platforms based on these prices. ECN forex brokers also serve as
counterparties to forex transactions, but it is a settlement that they
operate on instead of pricing basis. While fixed spreads are offered by
some market makers, spreads of currency pairs can be very different,
determined by the trading activities of the currency pair. In active
trading periods, sometimes you cannot get ECN spread at all, especially
in those very liquid currency pairs such as the majors (EUR/USD,
GBP/USD, USD/JPY, USD/CHF) and some currency crosses.
Pros and cons of the ECN forex broker
The ECN forex broker has both advantages and disadvantages. The pros and cons of the ECN forex broker are as follows.
The pros of the ECN forex broker can be presented in following aspects.
Traders can usually get better bid/ask prices for they are derived from multiple sources.
At certain time traders may trade on prices with no spread or with only very little spread.
Genuine
ECN forex broker will pass on the orders to a bank or other trading
participants on the opposite side of the transaction instead of trading
against the traders.
It is very likely that the prices on the ECN forex broker are more volatile.
Traders can take on the role of market traders to other traders on the ECNs since they can offer a price between bid and ask.
The cons of the ECN forex broker can be presented in following aspects.
Many ECN forex brokers do not provide integrated charting or new feeds.
Some trading platforms are not so easy for traders to use or operate.
Since
there are variable spreads between the bid and the ask prices, it may
be difficult to calculate stop-loss and breakeven points in pips in
advance.
Forex traders are obligated to pay commissions for each transaction.
It
is obvious that there are both pros and cons of an ECN forex broker.
Traders have to take many factors into consideration when choosing a
forex broker.
- In this video, we're focusing on forex and CFD brokers; this discussion does not apply to stocks and futures brokers.
- The simple truth is that most forex and CFD brokers are trading against
their clients. The details in how this is accomplished vary greatly
from broker to broker. Broadly speaking, we can say there are two types
of brokers: A Book brokers and B Book brokers.
- A Book brokers
may technically be trading against their clients in that they are
taking the opposite side of the trade, but they generally are taking a
risk neutral approach to the market and are looking to immediately
offset the trade. So they are not trading against their client in
spirit, only in technicality.
- B Book brokers will choose what
positions of their clients they wish to offset. As such, they are
willing to take a directional position in the market, and thus may be
trading against their clients in a more material way. For instance,
suppose the B Book broker wants to take a long Euro position in the
market. To do this, they may not offset the short Euro trades their
clients have put on; rather, they will simply take the other side of
these trades.
- A Book and B Book brokers can both run into big
problems -- for themselves, and in turn, their clients -- if the larger
banks and brokerage firms they offset orders with no longer take
positions. This risk is known as liquidity risk. We saw liquidity risk
have a devastating impact on both A Book and B Book brokers when the
Swiss National Bank unpegged the Swiss Franc from the Euro, resulting in
a huge move in a matter of minutes.
- As a general rule of
thumb, the more illiquid instruments a broker offers and the more
leverage they offer the more likely they are a B book broker whose
positions in the market are a significant part of their business. These
types of brokers are giving signals they are comfortable with liquidity
risk, which means they are comfortable taking the other side of the
customer's position.
- B Book brokers have a conflict of
interest that makes it seem like they are dishonest and unethical, but
they can offer their clients significant benefits that A Book brokers
cannot. Namely, their willlingness to take on liquidity risk means they
can offer prices and trading opportunities that would otherwise not be
available. They bundle their customer orders to customers with lower
trading costs, and offer trading free from restrictions like the pattern
day trader rule or any uptick rule. As such, B Book brokers are not
entirely bad or useless. What matters is whether you value the
advantages they offer and that you trust them not to abuse their
position as your counterparty.
- You can ask your broker directly about their dealing desk policy, though many will be coy about their status. This is largely because they feel uncomfortable about admitting their status as the counterparty to your trade, and because they generally do not educate their staff in the nuances of how they operate and make money.
Forex Broker Types - MM,NDD,STP,ECN
This is small 10 minute education video about the following: the difference between Forex Broker Types - MM,NDD,STP,ECN
Before the internet, very few individuals traded foreign exchange as they could not get access to a level of pricing that would allow them a reasonable chance to profit after transaction costs. Shortly after the internet became mainstream however several firms built online trading platforms which gave the individual trader a much higher level access to the market. The internet introduced two main features into the equation which were not present before:
1. Streaming Quotes: The Internet allowed these firms to stream quotes directly to traders and then have them execute on those quotes from their computer instead of having to deal over the phone. This automated trade processing, and therefore made it easier for firms to offer the ability to trade fx to the individuals and still be profitable.
2. Automatic Margin Calls: What is not so obvious but what was perhaps even more key is that the internet allowed an automated margin call feature to be built into the platform. This allowed firms to accept cash deposits from clients instead of having to put them through the process of signing up to trade via a credit line. As we discussed in our last lesson it is very difficult to get a credit line to trade FX and for those who do it is a lot of paperwork and hoops to jump through before they can begin trading. This would have made it impossible to offer FX trading to smaller individual traders as the cost involved in getting them set up to trade would not be worth it.
As the electronic platform allowed clients to deposit funds and then automatically cut them out of positions if they got to low on funds, this negated the need for credit lines and made the work to get an individual account open well worth it to the forex broker from a profit standpoint.
If you don't understand all the ins and outs of margin at this point don't worry as this is something that we are going to go into much more detail on in a later lesson.
For now it is simply important to understand that what these firms did was take all the traders who were not big enough by themselves to get access to good pricing and routed their order flow through one entity that was. This allowed these firms access to much tighter pricing than would otherwise have been possible which was then passed along plus a little for the brokers to the end client.
So now you can see why although the forex market has been around for a relatively long period of time, individuals have only started to trade the market over the last few years.
Anther key thing that it is important to understand here is that the larger a firm gets in terms of trading volume, the greater access that firm has to tighter prices and liquidity and the more likely that firm is to be able to pass on better pricing and execution to their clients.
Learn how to sort through the chaos and confusion on the web to learn what forex brokers are best for individual currency traders.
What forex traders need to consider regarding the regulatory environment of the forex broker they trade with.
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