Is there a group of people who can trade the forex markets without a spread, or at least MUCH less than I pay?

Sunday, April 13, 2014 , Posted by Ryanita at 11:57 PM




Sandor S


If trillions of dollars gets traded back and forth on a daily basis, it doesn't make any sense that everyone has to pay a spread of 0.03%, because that is a lot of money that is disappearing from everyone's pockets, a billion dollars a day, and even if they did all have to pay it, it has to be going to someone. Someone who is able to trade for free because he is the one who keeps the profits of the difference between bid and ask. Who is that someone?

I ask because I have created an adaptive trading method that only works with horribly low spread. Too low for me to use, but it must be horrifically valuable to SOMEone out there. And when I say it is adaptive, I mean that there is no a priori strategy, it looks at the last 63 days every 2 weeks and decides on the trading rules it will apply over the next two weeks from that alone, so it isn't adapted to any future data; it's not cheating. Operating on the USD/JPY from July 1, 2007 to Feb 13, 2009, these are its results from one run (since it contains random variables, if you ran it again on the exact same data you'd get different numbers, but the same SORTS of results):

Commission=0.02:
Total gain=1.9586666009107498e-001
Total commissions=4.3467080397738096e+000

Commission=0.01:
Total gain=1.4452129891615770e+000
Total commissions=2.5255991687861270e+000

Commission=0.0079:
Total gain=6.0134531854447415e+000
Total commissions=1.3535088531109761e+001

Commission=0.005:
Total gain=8.3681903017587498e+007
Total commissions=2.2229280168087495e+008

Commission=0.0029:
Total gain=5.3964686183550566e+012
Total commissions=6.6395560659541475e+012

Commission=0.0019:
Total gain=3.7134772078865466e+017
Total commissions=2.0657410633892125e+017

Commission=0:
Total gain=4.7437229016568531e+049
Total commissions=0

Note that 5.5e+026 is the computer's way of expressing scientific notation, and that example would be 5.5 times 10 to the 26th power.

As you can see, it works astronomically well with as low a spread as possible, but nothing that is given realistically by any brokers to small fish like me.

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The answer I will not accept:

"there would be no one willing to facilitate trades if they didn't get to take a cut"

Obviously. I'm asking if there's anyone who takes a smaller cut. Or maybe a cut that doesn't go up with trade size - after all, buy stocks with a stock broker, and it's usually 5 or 10 dollars per TRADE. But it doesn't matter what the trade size is. But with a spread on the forex market, with double the trade size, it's double the commission. And like I said, whoever IS pocketing the difference, surely HE must be able to trade without a spread since he's the one who pockets the difference! Certainly this would be worth something to THAT person. It is fundamentally impossible for everyone to lose that money when they trade because it GOES somewhere, and it certainly doesn't COST that much to keep the markets running. It doesn't cost anyone anything for me to enter in an electronic order to trade 300 thousand dollars for 30 million yen and for it all to be carried out by computers but I lose about 100 dollars each round trip in the act of doing so. Maybe at the very least there's some group of people who pay, say, a million dollars a year for however much trading they want, in lieu of spreads. This trading method would make a lot more than that million dollars.
Bill Q - of course if as you say, it's not being collected by one single group but by multitudes of middlemen, that could be a problem. But the thing is, it doesn't really need to be ZERO - it would need to be about a sixth of what the best brokers I can find charge to work reasonably well - and as you can see from the list above, the less percentage they charge, the more actual commissions are actually collected as well so it would be in their best interests to consider it.

The thing is, that if they're offering .03% per trade, that means they're happy with a profit of a mere 3 dollars for one USD/JPY lot (10000 USD against however many JPY that is equivalent to). Or even smaller scale, they're willing to settle for a dollar or so with one MXN/JPY lot (mexican peso). Yet they insist on 3000 dollars of profit for me to trade 1000 lots. No middleground at all! If they'd only settle for a mere 300, we could all make SO much money! But WHO would I talk to about possibly doing this?



Answer
The people who are "pocketing the spread" are not pocketing the whole spread. They have to pay for the computers, their offices, their staffs, etc. They only pocket what's left over after that. Certainly if you are making big trades, they should charge you a lower spread, but they still have to charge you some spread.

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waheed





Answer
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