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Order Book Trading Forex

May 13, 2009 by  
Filed under Forex Market

The one thing that I really wish I had on Forex is an order book. An order book is a read out of every trade that is being made in a market. There are traders who specialize in just trading the order book, they watch and see the orders come in and they make trades based on what they see in the price action.

When trading the order book, if you see a series of trades come in from a major bank, then can guess that they are trying to hide their position. You can make a profit by just following their trades.

One problem with order book trading is that it’s very rare to find order book software for Forex. This because most retail brokers do not give their customers a direct feed of currency prices and they do not have access to order flow data. There are ECN’s and direct bank feeds that offer an order book. This type of trading is one of the most successful forms of scalping there is.

In other markets, this type of access is known as level 2 access. Level 1 access is what the bulk of Forex retail brokers provide.

If you ever wanted to know what order book trading looks like, then head to youtube and search for order book trading, and you will find several examples of how traders use the order book to scalp markets.

My goal is to get a direct feed from a major bank so that I can be directly tapped into the market. I want to pay commission and not pips to trade and I want level 2 access. My reason for wanting to pay commission instead of pips is because I like to scalp the market.

As a scalper, I am trying to make micro-pips and pip based payment plan cuts into my profit and it makes my style of trading impossible. This is something that all scalpers or would be scalpers should know about trading Forex with a retail brokers.

Retail brokers just aren’t good for scalpers because they have made it impossible for us to use our style of trading. The ECN’s and direct bank accounts make it easy to scalp using level 2 and you can scalp for less than a pip of profit. I find that this is the most profitable form of scalping there is.

As you can see, the order book is something that is missing from almost all retail brokers. The order book is also known as level 2 access. It is one of the most profitable ways to trade any market and it’s a great tool to use if you scalp the market.

Only ECN’s and direct banks give traders access to this much needed order book data but these ECN’s and banks normally require a higher deposit amount than your standard market maker retail Forex broker. Who you choose to trade Forex with should be based on the tools you need.

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