The Philippine stock market -- one of region's laggards
Today, many are just beginning to see the great benefits and advantages to trading online as compared with trading in our market.
1. In the Philippines, short selling is still illegal even if a few brokers and big dealers are able to evade the law and short the market. But prices will go up and down. On average, 3 to 6 months moving up and 7 to 9 months going down. This means that for the majority of traders and brokers, there is nothing to do, no earning opportunities during 8 or more months of every year. Those who insist on trading despite the adverse situation are doomed to lose.
Compare this to Online Trading, where short selling is available all the time. And for Forex and some futures, we can trade 24 hours every day. Earning opportunities are available 12 months of every year and every trading day, the whole 24-hour day.
2. Here, after commissions which vary from client to client and taxes and other charges, turn-around costs would amount to some 1.7% or more of gross value. In Online Trading, turn-around costs are never more than 0.004% or just a 2 to 4-pip spread. A price rise of a mere 1% constitutes a great big profit, already.
3. In the stock market, margin is fixed at 50% of gross value compared with 0.25% or just 25 pips if we trade online.
4. Here, we have to call up our broker and he executes our orders. In Online Trading, we can key in our orders directly by using our own PC in the comfort of our home or office. No one to consult or screen our orders. No delays.
5. Here, we will be charged interest at banking rates based on our debit balance. Online, the charge is less than a very insignificant 1 pip equivalent value for every additional day that we hold on to our position.
6. Regarding liquidity, except for the few most active blue chip issues here, we might not be able to buy or sell significant volumes. Even a millionpeso order could take more than a day to complete. And the listed issues are comparatively few. In online trading, CFDs trade in the billions of dollars per day and Forex in the trillions. We can buy and sell as much as we want, very easily. And we can choose to trade shares, indices, commodities or forex. Moreover, there are always issues and products having their bull run.
7. Here, rumors fly but accurate and timely information are scarce and hard to come by. The information that filter down to us from our brokers are generally too late for trading purposes. And worse, here, the news is too often fabricated or manipulated or else its release is delayed by our corrupt government officials and unscrupulous insiders until after they have already loaded or unloaded their shares. In Online Trading however, we just have to tune in to Bloomberg, CNN or BBC or we can click our mouse to get all the news we want over the Internet or from your brokers.
But we don't even need to know the news. Provided that we have developed the necessary reading skills, we can consult our charts and trade just as profitably. All significant buying and selling will register in the charts and warn us even before the news breaks. Charts are free and are available in real time to everyone without any delay.
8. Of great help in the honing of our trading skills is the availability of demo trading facilities where beginners can learn from simulated trading without risk of losing real money.
9. Now, we don't need a lot of money to earn money. We can start to trade with as small as a $300 initial start up fund with FXCM.
Considering all these, it's no surprise that our market has long lagged behind its neighbors and the rest of the world while Online Trading continues to grow by leaps and bounds.
GCI Dealing Desk Execution and FXCM Auto-execution or No Dealing Desk Execution compared
The situation at the dealing desk
Orders from different member brokers are enqueued in a central computer on first in, first filled basis. Stops, Limits and Market Orders are executed at the next available price.
Sample postings of Buying and Selling orders
Buying // Selling
Price Lots // Price Lots
2.0004 40000 // 2.0007 35000
2.0003 25000 // 2.0008 45000
2.0002 50000 // 2.0009 65000
1.9992 75000 // 2.0019 60000
Possible trading scenarios
1. Client clicks a Market Order to Buy 100000 lots -- He is filled 35000 lots at 2.0007, 45000 lots at 2.0008 and 20000 lots at 2.0009. Immediately, the quotation is changed to now Selling at 2.0009.
With the sellers at 2.0007 cleaned out, new Limit Orders are enqueued at their limit price but Market Orders and Stop Loss Orders are executed at the next available higher price, immediately.
At this point in time, it is possible that other brokers and traders might then opt not to wait, and instead be the first to hit up at the next high price. If the next price is cleaned out, brokers’ limit orders would be out of market and left unfilled. The price may or may not come back down.
In this scenario, if we had placed an order to Buy at 2.0007 or 2.0008 even as 2.0007 was still being transacted, we would not be filled because there is no longer a Seller at that price. Instead, we would be requoted at the new price, which is 2.0009. If we placed a market order with our trading mode set to At best on the FXCM platform, then our order will be filled at the next best price.
If we had set our Stop at 2.0008 to Cover a Short position, again, we would not be filled at 2.0008 but at 2.0009, provided that we are next on queue. Should there be others ahead of us, we might get Closed at much higher, wherever our order can be matched. If the next Seller as in this example is posted at 2.0019, then our position would be Closed at that high price.
If Buyers in panic should Buy everything offered up to the price of 2.0055 and the next Buyer after they are done buying is only posted at 2.0030, it is possible that a Seller might Sell down to his low price right after. Gaps happen all the time and not all prices in between are transacted. We should exercise extra caution in such panic situations.
Take note that there are other member brokers and other traders that may be posting orders before our own kicks in or are triggered. They will move us farther and farther in the queue, even as they will be filled in the order that other Buy and Sell orders come.
2. Conversely, if a client clicks a Market Order to Sell 100000 lots, then chances are that our late orders to Sell will only be executed at 2.0003 and lower. Everytime, our orders can only be attended to based on their position in the queue.
3. During Breaking News and the release of significant economic reports, sometimes prices spike some 50 pips and more, even as much as 200 pips. The above examples will likely occur, but with much greater slippage.
4. Scalping is the act of attempting to profit from a surge or plunge in price. An example is to Limit Buy or Buy at Market immediately after the announcement of a positive news. But everyone usually has the same idea. So big orders flood in, hence the sharp surge. If others were able to place their orders ahead of us when the price was say, 2.0001, our Limit Buy will likely not be filled and our Market Order could get filled at 2.0051 and higher. Anything wild can and does happen during panic situations.
If we set a Stop at the same time as our Buy order, we could get filled high. At some price, the Buyers will be satisfied and Selling will come in forcing down the price. If our Limit has not been reached or even if it manages to trade at our Limit price, but there are plenty of Sell Orders ahead of us, we won't be Sold at our Limit but we could be Stopped when the price turns down. Everything will depend on the queuing order.
5. Bad prices are the unwarranted spikes and plunges seen in the charts, sometimes as much as hundreds of pips. Many of these are broker errors. But whatever the reason, they are followed by an immediate return to the true going price. For this reason, some brokers employs dealers who execute orders manually, and does not rely purely on automatic order execution by computer. If a price surge is determined to be a bad price or quote, then our Stop or Limit will not be executed.
Had broker dealing been on automatic, we could have Sold at a high price but on the other extreme, we would have been Closed out. So the Manual Dealing in place by some brokers is also for the trader's protection, to prevent his incurring great and unwarranted losses in the event of irrational price moves against his position.
GCI controls
All orders are timed and logged in to the GCI computer. In the event of a complaint, the records are accessed and the error, if any, can be verified. The owner-trader only needs to send a request for an audit of the questioned transaction together with a short narrative complete with details and a screenshot, if possible, of his trading platform.
Recommendations
1. Prefer to trade the European currencies between NY closing and Europe opening. There won't be too many surprise news or trend-reversing announcements. If possible, especially if not very confident in your position, Close them before expected announcements or releases of economic reports.
2. Do not try to trade on the news or profit from surges and plunges in prices. Position early and get out early before panic situations. Especially, never place Entry Stop Orders where slippages are very possible.
3. In the event that you suspect an error was made, you should ask for an audit by GCI. GCI will investigate and where GCI is at fault, the appropriate amount will be credited to your account.
These policies, rules and procedures are standard practice by most all International Forex Brokers. With few exceptions, complaints of similar nature to the cases cited above by new and inexperienced traders who are not familiar with these policies, rules and procedures are completely unjustified and without merit.
The early days of the Internet and our Training were some of the most exciting, full of hope and promise. A time of discovery. A magical time. Everything went right. We could do no wrong.
Lessons were learned. Our abilities were developed. Our dreams were made possible, everything we desired was within our grasp.
You can relive those magical moments by subscribing to Currency Trader where you can access the complete training records from September, 2003 until our transition to Forex 300 Club in July, 2009.
1. To enable all the trainees to follow my trading in real time, the usernames and
passwords were emailed to them even before the demos were first traded. All the source
emails and statements are accessible from our archives and also from our Files Section,
Managed Accounts and Training Files sections.
2. To protect the interests of our clients, all information relating to their live accounts are
regarded as confidential and classified information, not to be revealed to others.
However, demos are traded in real time under actual conditions. They approximate actual
live trading in every way and for our purposes can serve just as well as any actual results.
3. For purposes of a more effective comparison, the data figures where a $500 fund or 1
mini lot was utilized were adjusted based on a $50,000 fund. The projected averages were
based on actual or 30 days per month and 261 trading days per year.
4. The basic trading strategy is our Turn100 and 1 or 2 mini lots/1000 equity recommended
or safe loading limit. Fast track is trading at more than the safe loading limit, over 2/1000.
Daytrade sets Stops and Limits to much closer ranges and turns over several times in a
single day. In ID968, the losses were due mainly to my disorientation not having daytraded
in quite a while, experimenting too much and overextending or positioning double the
recommended limits. As advised, I no longer daytrade for personal reasons but I did this for
the benefit of our more active traders. Nevertheless, I am confident that with more practice,
this strategy can earn for others, just as well.
5. In trading the proposed managed funds as a general rule but subject to my discretion, I
will be employing the Turn100 Strategy and trading GBP, hence the info relating to other
strategies, fast track and daytrade, and the other currencies will not constitute a risk
factor. The other strategies and products were included in the demos merely to
demonstrate the possibilities. Nevertheless, setbacks at certain periods due to whatever
reasons are always to be expected. They are normal hazards against which
countermeasures have already been provided for in our strategies.
6. Under the Limited Management Plan and basing purely on the results of the 9-month
demos, profit projections on average, safe load, could range anywhere from 22% to 45% on
monthly basis and 2 to 4 times beginning capital projected to end of year on straight line basis
using 261 trading days, only. But as with all projections, there are never any guarantees.
FXCM Disclaimer:
Hypothetical performance results have many inherent limitations. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particularly trading program.
One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight.In addition, hypothetical trading does not involve financial risk. Variables such as the ability to adhere to a particular trading program in spite of trading losses as well as maintaining adequate liquidity are material points which can adversely affect actual real trading results.
RISK WARNING: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange you should carefully consider your monetary objectives, level of experience, and risk.
