Trading Pair Palette

Market makers generally offer more pairs to trade than ECNs because they have the flexibility to bundle small orders into large ones, offset some in-house, and send the rest upstream into the Interbank or a connecting ECN liquidity provider. ECNs generally offer only pairs composed of the major currencies and perhaps a few others. Straight-through order processes make it impossible to bundle small orders large enough for the Interbank. Only market makers do this, and it is one reason minors and exotics are more dominant on their platforms. A palette of 15 or 16 pairs is more than enough to satisfy most traders.

But some currency traders, including this author, like to explore the minors and exotics from time to time. The solution is to use an ECN for your major pair trading and a market maker when you want to dabble in the minors or exotics. FOREX.com, offers 50 pairs, for example. If you cannot find something to trade across 50 pairs, you may have the wrong game and perhaps should consider trading cocoons (silkworms) in Japan. Most brokers list their palette on their website. If not, ask. You may also find the number of pairs on the demo is less than the number on a live account. Again, ask if you are not certain.

By Michael Duane Archer
Michael Duane Archer has been an active futures and FOREX trader for more than 35 years. He has worked in various advisory capacities, notably as a commodity trading advisor, registered SEC investment advisor, and branch manager for Heinold of Hawaii. He currently trades FOREX and futures and is involved in several technical analysis research projects.

Copyrighted 2016. Content published with author's permission.

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