In FX -Pro Traders are Dying, Retail Traders Rising

At the beginning of last week, Bloomberg ran a long story mourning the demise of the bank FX trader. “Take the pay cut, “ warned one veteran darkly. “Oh, and don’t wait for the phone to ring.”

The computers have taken over. The algos now do most of the market making and HFT firms like Virtu dominate flow whittling margins to a tenth of pip. Long gone are the days when you could take your mates for a beer and get preferential treatment on client flow. Or better yet when you could simply markup deals 20 pips or more for “non market” sensitive customers like corporates, pension funds and equity mutual funds. It was a great party while lasted, built on insider info, expense accounts and very little economic value.

Dealing FX still remains a cheaters game. Banks continue to pay their multi billion dollar fines for rate fixing and proceed in their tricks and treats. But the party is clearly coming to an end. Customers are much smarter, everyone has access to price information and competition has become fierce. FX will never be a totally clean market until it goes on exchange but it’s good enough at this point so that retail traders can play the game on mostly level playing field.

And therein lies the irony. The very same technology that is killing the pro trader is enabling the retail trader to compete effectively in that most unforgiving of arenas -- the FX day trading market. Right now as I sit and type this, I am looking at nine screens that give me the following services all for free:

Streaming dealable quotes as tight at 1/10th of a pip on euro and yen and 1/2 pip on cable. Just a few years ago I was paying as much as 5 pips spread for GBP/USD and now that’s often my profit on a trade.

Live Squawk box out of London that keeps me up to date on all the breaking macro and central bank news, so I can react quickly to any potential action.

An RSS feed from my buddies at ForexLive that gives me color on the market 7 days a week.

Charts, Charts, Charts -- you name it you can have it and all for either free or a few bucks per month.

A Live News Applet that gives me eco data as quickly as a Bloomberg terminal

MT4 -- my very own algo machine that lets me manage my trade inventory at the speed of light and takes all the sloppy trade entry/logic out of my fumbling hands.

Last but certainly not least -- Slack. The greatest software of the 21st century that allows me to trade in a chat room with traders from all over the world 24 hours a day 5 days a week. All of our trades are instantly uploaded into the room and we can discuss, analyse and get inspiration from each other -- just like a dealing floor but only better.

So as I observe the market changes over the past decade, I can honestly say -- it’s only getting better.

Boris Schlossberg

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