Forex OTC Price Difference?
You can only open a new order at the current bid/ask
You can post a selll limit at $2 and it will stay there until the market reaches it.
Ah, that makes sense. I don't know much about the difference between Real ECN and the Dealing Desk structures. I was under the impression that with an ECN, anyone could post any price for a particular currency (play role of market maker) but reading some more on it, it seem like the ECN client would offer the Best Price in response to a Market Order. And the Buyer would Have-To accept whatever the client returns. I could be wrong but this is what I gather thus far.
There is no benefit for Brokers to spread their prices widely compared to the competition because of regulations. Brokers usually have to post both a Bid and a Ask. So if they quote $2 when the price is really $1.50 then they would be exploited. Individual quoting $2 when the price is $1.50 would have their offer stay on the table until the Real price reaches that amount. Thanks WHRoeder. Anyone who think I'm still confused please post your comments.
I read somewhere that Forex Market Makers can charge any price they want.
Sure they can, if they are the counter-party to your trade. Brokers have a lot of power when it comes to deciding whether there is liquidity at the current bid/ask and if they decide that there isn't then they have the opportunity to take advantage of slip and requotes. (checkout the NFA issue with Gain capital and their MT4 virtual-dealer plugin)
The reason "ECN" is a marketing feature that gets advertised to you is because you are supposed to feel that the broker has added value to your ability to avoid these types of shenanigans because the pools of liquidity are intended to be broader and thus the price you are quoted is less subject to manipulation.
(An ECN broker is not necessarily the counter-party to your trade, although being an ECN broker does not mean they don't take the opposing position on occasion)
Does it mean that if the Inter Bank price on EUR/USD is 1.543210. And the Inter Bank spread is 2-PIPS. Therefore, the range the market participants can vary prices is 1.543100 and 1.543300? Or could I set my own price on an ECN at anything I want like 2.000000 and hope someone is dumb enough to purchase my Euros at $2 dollars USD.
It is really no different in concept than dealing with an on-exchange investment vehicle like the stock or bond market if you view the currency pair itself as nothing more special than a ticker symbol.
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This is kinda a basics question. I read somewhere that Forex Market Makers can charge any price they want. Then I read somewhere else that the participants can ONLY vary their prices with-in the spreads. With-in the spread? What does that mean?
Does it mean that if the Inter Bank price on EUR/USD is 1.543210. And the Inter Bank spread is 2-PIPS. Therefore, the range the market participants can vary prices is 1.543100 and 1.543300? Or could I set my own price on an ECN at anything I want like 2.000000 and hope someone is dumb enough to purchase my Euros at $2 dollars USD.