Beating the spread

[Trevman]

attached is some work done on the brokers edge (the spread) on a given trade. the pics are from somewhere on this forum but i can't remember who did it (just so no one thinks i'm nicking it as mine, can't rememebr who it was though - kudos to them anyway).

as you can see the larger the trade target/limit the smaller the edge. however it IS still there, but if you took trades in the direction of positive interest with 50/50 ratio and based on longer trades (one for the micro-mini's) with the aim of the interest paying for your spread you may be able to reclaim the spread and in turn beat it.

if the above stands to be workable then if with each trade you ignore your profit loss and look at the interest after the spread is deducted, if this is positive then the odds are infact in your favour and so continually trading 50/50 would negate profit loss and result in accumulated interest, AND if that stands true then surely you could use the trend as your friend and find an entry point on a trend in the direction of positive interest to again increase the odds in your favour.

[fxtrader777]

Interesting!
i will comment one thing on spreads too
I will not name broker because their reputation affects my pockets LOL but will tell you one broker mistake.
The AUJPY spread was 10 pips, while spread for AUDUSD was 4 and for USDJPY 3, so if you had open position in AUDJPY you would have payed 10 pips as spread. But with another alternative you could do following:
1. Say we want to go long in AUDJPY
we are buying AUDUSD and USDJPY, this means we are long in AUDJPY. As AUDUSD nad USDJPY changes the AUDJPY changes with their proportion too so profit/loss is the same. BUT you pay 4 pips + 3 pips = 7 pip as spread vs 10 pips. Of course in the second trade position size is bigger but if it is intraday trade and you do not risk much it does not matter

[mmont]

1. Say we want to go long in AUDJPY
we are buying AUDUSD and USDJPY, this means we are long in AUDJPY.

FXTRADER777
You are wrong.

How the AUD or the JPY moves against the USD is not necessarily how the AUD will move against the JPY.

So if your position is based on a signal for AUDJPY you will, more then likly, be sorely disapointed with your USD positions.

[fxtrader777]

If it is not so then there will be triangular arbitrage. Learned in International Finances. As forex is almost perfect the triangular arbitrage happen very seldom. Or even does not happen. SO if Cross rate moves as moves its components then longing/shorting the cross is almost longing/shorting its components.

If you plan to go long at EURJPY you can went long in EURUSD and USDJPY at the same time. The profit/loss will be almost same. If it is not so then there is opportunity of riskfree profits. Called triangular Arbitrage

thanks

[mmont]

FXTRADER777
SO if Cross rate moves as moves its components then longing/shorting the cross is almost longing/shorting its components
That's my point.
USD is NOT a componant of EURJPY.
If the EUR goes up against the yen it does not follow that the EUR will also rise against the BUCK.
Just look at the last quote at 2:51PM EDST.
You'd be down 32 pips on the USD crosses, while the E/J is up 7 pips.

"Learned in International Finances" or not.

[Trevman]

people seemed to have missed my original post and negated to comment on it , however i am with fxtrader777 on this one. if you buy EURUSD and then however many USD you are exposed by you buy the same amount on USDJPY you would have no exposure to the the USD thus leaving EUR/JPY.

[fxtrader777]

Originally Posted by mmont

FXTRADER777
SO if Cross rate moves as moves its components then longing/shorting the cross is almost longing/shorting its components
That's my point.
USD is NOT a componant of EURJPY.
If the EUR goes up against the yen it does not follow that the EUR will also rise against the BUCK.
Just look at the last quote at 2:51PM EDST.
You'd be down 32 pips on the USD crosses, while the E/J is up 7 pips.

"Learned in International Finances" or not.

Involve a little Mathematics and you will understand the concept.
As for International Finance if you do not believe me Google it. Write Triangular Arbitrage in google search and you will get the answer.
when you are long in EURUSD and long in USDJPY you are not depended on USD because two USD equalize each other (or how to say, do not know enough English). This trade becomes dependant of EUR and JPY thus EURJPY pair.
Why are this forum members so agresive. IF you do not know anything it is not a shame, I do not know a lot of thing but I confess and listen to the teacher.
The concept is clear as boiled eggs( Russian byword). Involve Mathematics and you will understand what I am saying

thanks

[mmont]

This trade becomes dependant of EUR and JPY thus EURJPY pair.

I repeat, the trade is EUR vs JPY. How each moves against the buck is not
necessarily
how they move against each other.
If you consider yourself the teacher then you should know it's not clear an egg is boiled unless you break it ( or spin it ).
So forget about International Finance and Triangular Arbitrage and do a quick look back at the price action thats under your nose. Do some " arithmetic " dont even need math, and you will see the light.

Why are this forum members so agresive.

Jezz, lighten up, it's a discussion.

Let me know how your research comes out.