Trading Problem

  • What is Spread??
  • What is slippage?
  • What Causes Slippage?
  • How to minimize the negative impact of slippage?
  • What is price gap?
  • Why the spread will increase?
  • Does locked position still require margin?
  • Why do I get charged a higher swap rate on FX positions on a Wednesday?
  • What is the maximum NOP (Net Open Position)?
  • How long can I keep my positions open for?
  • How are CFD product prices calculatedS?
  • What is Spread?

    An exchange rate, applied to a customer willing to purchase a quote currency is called BID. It is the highest price that a currency pair will be bought. And a price of quote currency selling is called ASK. It's the lowest price that a currency pair will be offered for sale. BID is always lower than ASK. The difference between ASK and BID is called spread. It represents brokerage service costs and replaces transactions fees.

  • What is slippage?

    Slippage refers to the difference between the expected price of a trade and the price at which the trade is actually executed.

  • What Causes Slippage?

    There are three reasons for slippage:
    1)Network delay.
    (STP-ECN) Orders from the client terminal (computer or mobile phone) need to go through multiple servers to enter the last completed ECN data center, the time required to go through this period depends on the physical distance between the trader and the ECN data center. The global ECN data center is mainly concentrated in London, New York, and Tokyo. If you are trading in mainland China, you need to consider the impact of the firewall. The server link that you need to go through will be more complicated than most countries. The time spent on a single transaction is about 200-600 milliseconds. The ECN data center quotes are rapidly changing at a rate of milliseconds. When an order is triggered from the trader's computer and reaches the ECN data center after 300 milliseconds, the price may have changed, and the final transaction price may get better or worse. If the trading location is in the same building as the ECN data center, this delay can be neglected. Some high-frequency trading institutions in the world often set up trading centers close to the data center. If the market is small, the price changes slowly even almost no impact. If it is just a major data release, non-agricultural price changes will occur dozens of points or even hundreds of points.

    2)Market Depth.
    The quotation of ECN data center has different market depth at different times. Whenever there is an imbalance of buyers, sellers, prices and trade volumes, prices will need to shift, and trade orders will need to be adjusted to the next available price. A so-called slippage situation occurs. For example, When the customer sells 1.1 M at 1.06852, the transaction will be made at 1.06852, but if the customer sells 3.7 M at 1.06852, the price of 1.2 M + 1 M + 1.5 M will be weighted and averaged, and the transaction price (1.2 * 1.06852 + 1.06851 + 1.5 * 1.06849) / 3.7 = 1.068505. Since the MT4 platform does not provide a deep view, there will be what the customer thinks of as a Slippage in this case.


    3)Pending order execution mechanism
    The slippage most often occurs in the moment of the pending order execution (including stop-loss and take-profit) and it is also where the primary trader gives the most feedback. Here are three sentences + an example to illustrate the problem: Pending order execution mechanism: When the price reaches or exceeds the price of the pending order - --- order triggered (triggered, not completed) - - the order can be sold after the trigger price. Therefore, the market trend after triggering determines the execution price. Usually in a favorable situation, orders are traded at a more favorable price, and in a negative situation orders are traded at a more unfavorable price. Therefore, take-profit order is higher probability to make money whereas stop-loss order tend to lose money.

    For example: The long XAUUSD order is entered at 1211.45 with take profit at 1220. If there are sell limit orders on the order book at 1219.6, 1219.8 and 1220.1 and 1219.5 respectively, the take profit order will turn to market order once there is order with price higher than 1220 (1220.1). And this market order will be executed at the next available price at 1219.5. If the next available offer after 1220.10 is 1222, the order will most likely close to 1222.00.

    Slippage is inevitable and it's hard to predict the range. Therefore, GeminiCap won't take responsibility for any results caused by the market slippage.
  • How to minimize the negative impact of slippage?

    First of all, slippage cannot be avoided and the range of the slippage cannot be foreseen. In the real market, we cannot forecast the market movement and thus cannot provide slippage range.
    The chances of slippage may be reduced by following methods: using limit orders to lower the possibility of slippage; Avoid trading with heavy positions, and always remains enough free margin in account in case of extreme market movement; GeminiCap urges our client to read the risk disclosure beyond before trading.

  • What is price gap?

    Gaps are areas on a chart where the price of market moves sharply up or down with little or no trading in between. As a result, the asset's chart shows a "gap" in the normal price pattern.

    There are many potential reasons for this kind of event. Generally, a gap will occur, when the day open price is significantly different with previous close; or when the market
    liquidity is extremely low and price is moving at a large scale; or there is an economic or political event released. Moreover, we'd like to suggest clients try to avoid or minimize the
    open positions before any political event or news before the weekend, and realize that a gap after is highly possible. We also provide some examples of pending orders and TP/SL during the extreme market movements with thin liquidity.
    Case 1: Take Profit
    Long position with take profit, which is a sell limit order.
    Limit Order:Client longs 1 lot of XAUSUD at market price 1375.16. Meanwhile, the client sets a take profit order at 1376.90.
    Execution:after the client set the Take Profit order, market price did not reach 1376.90. However the market price suddenly jumped and a gap occurred, the ask price jumped through 1376.90 to 1377.34. The take profit order was triggered and filled at 1377.34, making 44 USD extra profit, comparing with the preset limit price1376.90.
    Order Type Volume Symbol Lot Commodities Enter Price Sell Limit Filled Price
    Buy 1 XAUUSD 1375.16 1376.90 1377.34

    Sell position closed by stop loss, which is a buy stop order.
    Limit Order:Client shorts 1 lot of XAUSUD at market price 1430.23. Meanwhile, the client sets a stop loss order at 1432.83. Execution:after the client set the Stop Loss order, market price did not reach 1432.83. However the market price suddenly jumped and a gap occurred, the ask price jumped through 1432.83 to 1433.02. The stop loss order was triggered and filled at 1433.02, making 19 USD extra loss, comparing with the preset stop price1432.83.
    Order Type Volume Symbol Lot Commodities Enter Price Sell Stop Filled Price
    买入 1 XAUUSD 1430.23 1432.83 1433.02

    Case 3:Open a position by buy limit
    Open a new position by buy limit.
    Limit Order:Client enters a Buy Limit order of 1 lot EUR/USD at 1.3180.
    Execution:after the client set the buy limit order, market price did not reach 1.3180. However the market price suddenly slumped and a gap occurred, the bid price fell through 1.3180 to 1.3173,The buy limit order was triggered and filled at 1.3173, making 70 USD extra profit, comparing with the preset limit price.
    Order Type Volume Symbol Lot Commodities Enter Price Filled Price
    Buy Limit 1 EURUSD 1.3180 1.3173

    Case 4:Open a position by Sell Stop
    Open a new position by Sell Stop.
    Stop Order:Client enters a Sell Stop order of 1 lot GBP/USD at 1.6420. Execution:after the client set the Sell Stop order, market price did not reach 1.6420. However the market price suddenly slumped and a gap occurred, the ask price fell through 1.6420 to 1.6418,The Sell Stop order was triggered and filled at 1.6418, making 20 USD less profit, comparing with the preset Stop price.
    Order Type Volume Symbo Lot Commodities Enter Price Filled Price
    Sell Stop 1 GBPUSD 1.6420 1.6418
    Any orders (including Take Profit, Stop Loss, Pending Order) may be affected by market movements and gaps and cannot be executed by the best price. In this case, the order will be executed at the next best market price. The range of slippage depends on the liquidity of both side of buyers and sellers in the market. The ECN automatically matches and executes the orders requested, which are filled at the best available prices.
    A gap may happen at:
    a. Important economic data release like NFP;
    b. Unexpected economic data release;
    c. News release about monetary and fiscal policy;
    d. Important officials' speech;
    e. A sudden surge of trading orders on a single product in the market.
    The impact of a price gap:
    1. during a price gap, the execution of Take Profit, Stop Loss, market orders or Pending Orders will all be affected. The orders will be executed at the next best available price from the underlying market. As a result, we cannot foresee how much is the impact.
    2. Slippage will occur.
    3.The equity of the account may turn to negative after the stop out due to the slippage.
    Disclaimer: Since price gaps are normal market event, GeminiCap strongly recommend clients to read risk disclaimer and to understand the real market movement before trading. GeminiCap will not carry responsibility or reimburse of slippage and stop-outs which is caused by extreme price move of real market.
  • Why the spread will increase?

    As an ECN broker, GeminiCap provides floating spread prices to our clients. Clients can check the normal level of each products. However, in some special cases, the spread of some products may become higher than normal level, as called as "Widen Spread".
    during the data release or news, Forex and Precious Metals spreads may widen. Also, the indices may widen their spread after the normal trading time. Before explaining the reason of widen spread, we need to mention ECN execution.
    The process of order execution in ECN Platform is:
    Client places the order-->Request send to broker-->order executed by interbank market
    It is worth noting that the best bid and ask price may can from different banks, so as the execution. So how the price feed is generated is illustrated as below

    In the interbank market, banks provide their own pricing on each product at the same time. The broker will aggregate the price feed and choose the best bid and ask price from the market and provide it to clients, so that the clients' interest will be optimized.
    E.g. for EUR/USD
    Citi Bank Pricing: Ask: 1.32035 Bid: 1.32010
    HSBC Pricing: Ask: 1.32033 Bid: 1.32011
    NAB Pricing: Ask: 1.32036 Bid: 1.32013
    …………….
    …………….
    this prices will be aggregated to the interbank market and sent to the ECN network.
    From the price feeds of 50+ global top-tier banks,GeminiCap will filter the best price, which in this case is 1.32033 (ask from HSBC), and 1.32013 (bid from NAB),so the client can see the price feed of 1.32033/1.32013. when the liquidity of the market is abundant, clients can get lower trading costs.
    Then why will the spread widen?
    During the periods of risk event or around market open and close, banks tend to cease the price feed and trading, as a method of risk management. As a result, when the liquidity of the market shrinks and only some banks provides the pricing, the spreads from GeminiCap may widen.
    the situation may happen at:
    a.five minutes around the Friday close and Monday open;
    b.Important economic data or big news release.
    The impact of a widened spread:
    1. Stop-outs; if the free margin in account is not enough, a widen spread may push the margin level below 100% and trigger the stop out. Slippage will occur during the execution.
    2. the execution of buy and sell orders are different; as the difference between bid and ask price widens, the execution prices for each side will be significantly different as well.
    GeminiCap kindly remind clients who have locked open positions to remain enough level of the free margin in case the margin level falls below 100% and trigger the stop-out. Disclaimer: Since widen spread of pricing are normal market event, GeminiCap strongly recommend clients to read risk disclaimer and to understand the real market movement before trading. GeminiCap will not carry responsibility or reimburse of slippage and stop-outs which is caused by extreme price move of real market.
  • Does locked position still require margin?

    In GeminiCap, locked positions will not require any margin.

  • Why do I get charged a higher swap rate on FX positions on a Wednesday?

    This is because a swap involves pushing back the value date on the underlying futures contract and on Wednesday this date changes from Friday to Monday. Swap is therefore charged for the extra 2 weekend days.

  • What is the maximum NOP (Net Open Position)?

    GeminiCap may tailor the leverage policy based on account's net open position.

  • How long can I keep my positions open for?

    You can keep your positions open for an indefinite period of time, as long as there is enough margin in your account.

  • How are CFD product prices calculatedS?

    The CFD product prices in GeminiCap are calculated based on underlying products and after the adjustment of interest rate and dividend.

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