Forex Trading: Execution Quality as Trade Size Increases

http://www.informedtrades.com/
My answer to a readers question about how fills are affected in the forex market when trade size increases specifically when trading news events.

Today someone asked me if the fill you get in the forex market will be the same around news if you are trading 1 Million or 10 Million. Below is my answer:

The fill you get comes down to the following factors:

1. The currency pair that you are trading (If you are trading EUR/USD you are going to be more likely to get 1 M off as quickly as you are 10 M than if you are trading USD/CAD for example)

2. The liquidity in that pair in the interbank market at the time you place the trade ( This is going to depend on number 1 plus how big the news event that you are trading is and how close to expectations the news comes in. The bigger the news event and the further away from expectations that the news comes in the less likely you will be able to get 1 M off as easily as 10 M)

3. The access the broker that you are trading with has to the available liquidity in the interbank market and/or their willingness to take and hold the opposite side of the trade if they are a market maker. (In general the bigger the broker the better access that they are going to have to the liquidity available in the interbank market)

Category:

Education

Tags:

• Forex
• forexmarket
• currency
• foreignexchange
• forextrading
• daytrade
• howto

[InformedTrades]

so that 100,000 position can move against you $9000 at which point you are going to be margined out of your trade and you will have $1000 left in your account. You do not have to pay any additional money to the broker. Let me know if this does not answer your question. Best Regards, Dave

[InformedTrades]

Hi Shanshou4, Thanks for the comment. When trading forex online you are going to be required to put up a certain amount of money to margin your positions as you have stated. This amount varies from broker to broker but for many of them it is $1000 for every 100,000 in currency. So using this as an example lets say you have an account with $10,000 in it and open 1 100,000 position. You will then have $1000 in used margin and $9000 in usable margin.

[Shanshou4]

Sir, I am not only asking about the lost of the margin account but also the money that the broker leverages to you. Do you have to pay the back not only the margain account but also the leverage account. Thank you!

[InformedTrades]

Hi Shanshou4, Thanks for the comment. I am not sure if I am understanding the question correctly here but yes if you use leverage to put on a position and then that position moves against you then you that money is taken out of your account. Let me know if that is not the answer you are looking for. Best Regards, Dave

[Shanshou4]

Sir, if you do a leveage and if you lose do you have to paid the broker back the leveage lost?