The greatest Forex questions ever asked

[TraderABC]

Here is a list of questions that I am working on. I believe that these types of questions are absolutely crucial and have to be dealt with in order to proceed with successful FOREX TRADING, not gambling. Unfortunately dozens of books on trading that I've read, by many authors (Williams, Elder, Bain, Ross, and others) don't seem to focus on THESE questions... In fact those books seem to be concerned too much with these various indicators with exotic names, alchohol clubs, big green lizzards and dogs... Too much rehash and repackaged material, which avoids aswering these questions in detail and non-vague terms....

1)How EXACTLY are the brokers compensated? Just by spread,slippage and swap? How do they finance our high leverages and manage to give us such a sweet deal??? And what are their financial interest in spot forex?

2) What procedures do brokers have to make sure that they don't go bankrupt? What procedures do marketmakers have to make sure that they don't go bankrupt and What procedures do Big Banks and corporations have to make sure that they don't go bankrupt through floating currency rates?

3)What happens if the broker can't find a match for a position? Do they take the other side of it? Or do they look for clients orders from another brokers?

4)How much control do they brokers have over the quotes that they give to their customers.

5) How big should the order be for it to leave the brokerage house and with which leverage?

6) How many feeds is there? Is there just one or two?
7) When price moves lets say one pip, what EXACTLY does that mean? What is the mathematical model behind it? WHo calculates the pip change.

8)Can there be price action (ie candles, or a movement) without any orders/deals being made? if so, how and why?

Here is an example: Suppose a Euro/USD moves, that move will cause USD/HKD to move to the other side without any trades required to be made in HKD! Or Eur/NZD vs NZD/JPY ...

9)What is the mathematical model for Forex currencies over popular time frames? Anti-Persistent, Random Walk, Persistent? To what degree (in Hurst) and how does it differ between various time frames?
10)How long is there price memory (crucial to know the values for MA's and indicators) and what is autocorrelation over various currencies and their timeframes?

11) How large should the order be to move lets say Euro 1 pip?

12) What is the real purpose of the Forex trading from the perspective of those who have made it? Some say it is to make the price more balanced. However that produces questions such as:
a)How can ordinary speculators be given such a responcibility and
b)How can our orders even affect the price in any noticible degree?

13) Who benefits and who loses in the Forex?

14) What percentange of VOLUME on forex comes from speculative trades(in other words from us) for profit.

15)How is liquidity provided and kept at the level?


Thank you all.

[FXGenius]

Those all are valid and good question, but sorry don't have the knowledge to answer them.

[Trevman]

im gonna have a go at answering some of these to the best of my knowledge at least (though im prob wrong, so here it is)

2) some brokers have insurance (of sorts) in the form of bonds, if oyu ask they should be happy to tell you (thats if they have them. of course not everyone does, look at everyones fav broker refco.

3) i think thats were slippage occurs, if no one wants to buy from your sell quote the price will go to the next possible value and thus youll be re-quoted

4)all of it, they make the rules we have to play by them. if we dont like their rules we leave to play somewhere else and they loose business, so that keeps them competitive with quotes

6) theres one main feed, from which each broker presents its own interppertation (eg, wider spread)

8)yes, when there are certain announcements made the base currency for that announcement is influenced and is seen as being over/undervalued and thus the exchange rate changes to reflect the "real" value

9) i think for hte most part its random (theres a thread around somewhere about the EUR/USD playing games)

10) i think there may be a range in which a currency is kept by people far higher than we can think to stop it becoming too silly (eg, $100 = £1)

13) for every winner there is a looser (otherwise you cant close positons)

14) volume cant be measured accuratley since there is no centeral exchange

15) people wanting to sell vs people wanting to buy, no one wants to take the other side so theres no liquidity

[Soul-Trader2004]

here's my stab at the ones i can muster

1) brokers make their money on spread And slippage AND re-quotes - let me explain.

many will say that they cant make money on spread as the market has that spread in it too - however who says you are in the market?

Brokers will play one clients sell against another clients buy - so they never actually go into the market - therefore at that time the spread is all theirs.

They keep a global tally of positions and if it becomes say more long than short then they enter the market with the difference as a hedge.

2. ask your broker

3. brokers can always find a match for your position - silly question as there is one bid and one ask but millions of participants.

4. total control - they make your market - the fact that it matches the real market is just marketing - they are the market maker and they decide what 'fair value' is.

5. dont know what you mean here - if you mean 'how big till you actually enter the market' then i dont know - depends on time of day etc - how long is a piece of string at midnight on the 28th?

6 there are hundreds - every market maker has one

7. when the market moves 1 pip or 10 it merely reflects the current bid and offer on the books. if 'fair value' increases then so will the bid / ask and so will your chart which is a reflection of this.

8.yes, if fair value changes in the market maker's opinion

9. buggared if i know

10 - if you find out , let me know on the back of a postage stamp - that's how much you or i should care.

11. see 'how long is a peice of string at midnight on the 27th january." - trust me, you cant do it yourself.

12.

• for the speculator - to make money
• For the hedger - to avoid losing money
• for the banks - to facilitate the exchange of money for clients and to get the best international intrest rate for their funds.

13. everybody in it gains and loses

14. who cares?

15 it isnt, liquidity changes with the number of deals being made

[forexfighter911]

I think TraderABC is trying to prove brokers screw you!

Focus on your trading rather than those things. If you have no confident in forex, go trade futures or stocks. Don't waste your time on these questions.