Archive | January, 2016

Shifting Spreads and Such

Shifting spreads keeping you guessing?

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Just as a chameleon will change to match a variety of backgrounds, in the currency market spread will invariably change to match market events. Here at the Apiary Fund, the ECN style market structure shows constantly changing spreads throughout the day. Spreads are either set naturally (by pending orders in the market) or, if the market is not liquid, set by the liquidity provider.

Since spreads will widen or shrink often, it is common to see them fluctuate during the open or close of trading sessions. This makes sense because the open and close of each trading session are usually the most volatile. Spreads will also adjust for

-Uncertainty in the direction of prices

-News events

-Volatility shifts

-Changes in liquidity

Liquidity providers use spread to help manage risk by either encouraging or discouraging the trading of the liquidity provider’s currency inventory. For example, if a liquidity provider wants to move inventory, they might narrow the spread to encourage trading; similarly, if they want to retain inventory, they might increase the spread to discourage trading in that currency. The magnitude of the spread indicates the degree to which a liquidity provider wants to encourage or discourage trading. Obviously, during uncertain times of high volatility and news events, it’s common to see spreads widen–sometimes significantly!

While spreads will always vary, by knowing why they’re changing you’re showing that you understand what’s moving the market. If you can understand spread changes, you’re one step closer to really knowing how to trade. You will be acting instead of reacting. Now see if you can predict where the next shift will be!

Happy Trading!

Shawn Lucas

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Trading and Misquotes

While viewing a chart, you are actually looking at two different prices: a historical price and a current price.

When you first open a chart, Alveo doesn’t have a history of current prices so it must backfill the chart with data from our “Historic Data” server; this is called historical data.

Once a chart is open, Alveo starts receiving “Current Price” data from our “Quote Server.” Apiary Fund has multiple liquidity providers who send their current price quote to our Quote Server which collects and organizes the different quotes, finds the best price, and broadcasts it to your computer.

The challenge with current price data is that occasionally we get an incorrect quote from one of our liquidity providers – called a misquote.  Since Alveo doesn’t know whether a quote is correct or not, it will “print” that quote on the chart.

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As you can imagine, misquotes are problematic for many reasons.  First, misquotes are not a true reflection of price and any analysis using a misquote will be inaccurate.  Second, the misquote may trigger pending orders. If the price limit of the pending order is between the current quote and the misquote, then it will trigger the pending order and give you a fill that is outside the current price.

No data or quote providers guarantee perfect data.  However, Alveo takes extra steps to make sure it has an impeccable record of clean data.  We have sophisticated systems in place to catch misquotes sent to us by our liquidity partners.  These systems catch the vast majority of misquotes, but again, no data is perfect and occasionally a misquote will slip past our watchful eyes – about one in about 100,000 misquotes to be precise.

Most of these misquotes are so close to the current price that you’ll never notice, but occasionally a misquote may pop up that is more apparent. If you suspect there is a misquote on your chart, you can find out by refreshing your data.  This will cause Alveo to pull historical price data.  If the spike on your chart goes away, then you’ll know it was a misquote.  If the spike on your chart remains, then you’ll know it was a good quote.

Happy Trading!

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Apiary Fund Resolutions

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It’s the beginning of a new year, and this means overflowing rec center parking lots as gym memberships increase along with work hours, dieting, and library cards as everybody desperately tries to hold onto their New Year Resolutions. It’s also a nice high volatile time for the stock market (even though this year had sort of a rough start, thanks Janet). Did your New Year resolutions include anything about helping you improve your trading? If so, we want to hear them!

Here’s what some of us around the office are working on:

Shawn Lucas– Lose weight and grow out my beard!

Dakota Andrews– Pass beeline to funding

Jacob Johnson– Develop a consistent trading strategy I have confidence in, get married and treat my wife like a queen, be profitable every month, and earn enough money to build a shipping container in the woods

Vilas Yang– Trade better by improving trading set ups (working with others), once I get this down the rest is going to be good!

Brian Lloyd– Double my trading account and profitability, and help others achieve their goals

Ron Evans– Become better at long term trading

Allisa Daybell– Spend as much time with my family as possible, and get three consecutive months of profit

Paul Allen– Become funded with Apiary by June 1st

As you can see, there’s so many goals we’re working together here at the hive! I hoped you noticed that most of the goals about trading were pretty specific–that’s one of the first steps to effective goal setting. Please share with us what resolutions you’ll be working on this year, and if there’s anything we can do to help!

Happy Trading!

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What An Old Fisherman Taught Me About The Markets

One of the greatest investors of all time had to be Noah…  They say Noah was able to float his stock while the rest of the world was in liquidation.  Impressive, eh!  While he may have been a good investor, he couldn’t have been much of a fisherman.  Why?  He only had two worms.

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If you’ve spent much time with a rod and reel, you might be quick to recognize the many lessons the sport teaches us about money in the market

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Here’s a short story about what an old fisherman – not Noah — taught me about the markets!

Link to Short Story:

http://issuu.com/apiaryfund/docs/apiary-fund-old-fisherman

Enjoy, and Happy Trading!

-Shawn

 

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