Why don't the prices on the charts match the prices on the Forex Trading Stations?
Because the spot FX market is decentralized – meaning it lacks a single exchange where all transactions are conducted – each FX dealer (market maker) will quote different prices on their markets. Therefore, any prices displayed by a third party charting provider, which does not employ the market maker’s data feed, will reflect “indicative” prices and not necessarily “dealing” prices. It is important to make a distinction between indicative prices and dealable prices. Indicative quotes are those that offer an indication of the prices in the market, and the rate at which they are changing. Market watchers, such as S&P or ESignal, compile indicative quotes as a proxy for the actual market movement. These prices are derived from a host of contributors like banks and clearing firms, which may or may not reflect where FXCM’s market is. Although these charts are not an accurate reflection of FXCM’s market, they can justifiably be used for technical analysis, since the overall trends in these markets will ultimately be the same due to the macroeconomic factors that drive the FX market as a whole. All quotes shown on the FXCM system are dealable prices, where FXCM as the market maker is willing to buy /sell the currency pair. FXCM feeds real time executable quotes through our own proprietary dealing platform, which update instantly on the slightest market move. Therefore, viewing the prices in the dealing rates window of the FX Trading Station will give traders an accurate picture of where FXCM’s market is. Those wishing to use a charting package that employs the FXCM data feed should consider the Stratagem charts or FXTrek II charts.
How is indicative Data Gathered? What is it?
Before online trading technology, such as the FX Trading Station, brought price transparency to the market by providing live streaming dealable prices, services like Reuters were instrumental in the price discovery process in the FX Market. Reuters (or any market watcher) compiles data from a host of contributors. Clerks employed by Reuters listen to dealers screaming prices on the floor and then enter them into the computer. Fund managers would watch Reuters to get an idea of where the market was, since there were significant price differences amongst providers. Accordingly, Reuters served as an advertisement of prices for institutional investors. It is important to note that prices on the Reuters dealing screen are indicative- showing the last buy/sell- and
not necessarily where the market maker is willing to buy/sell the currency pair. For the most part indicative prices are very close to dealing prices. Euro and Yen indicative rates tend to be more accurate, as a larger number of contributors feed in. CHF and GBP tend to be less accurate outside of European Market hours, as fewer banks today make markets in CHF and GBP since there is less demand for these currencies outside European hours. Sometimes CHF can be off by 20 points or more. It is also important to note that because these prices are being entered in manually, they are privy to human error- especially during a fast moving market.
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