The problem of requotes in Forex

One of the main problems forex traders face is that of requotes.

This seems to be an specific issue of market maker brokers in forex and CDFs. Stocks, futures and options do not have this problem in theory. However, when the markets are moving fast there are also problems when we do market orders in the traditional assets.

We may not get filled at the last price we saw when we entered the order. Problems of spread and slippage are also common in traditional markets.

Requotes Forex

The difference is that traditional brokers will not play around with these factors while forex market maker brokers may use them for their advantage.

When we get a requote is because our order gets filled at a different price than we saw when we place the order.

For instance, we may send the market order when the price is 1.3545, but the price moves so fast that our order gets filled at 1.3555, ten pips above.

Requotes are meant to occur in high volatility environments like news announcements. Those moments, the price moves strongly and liquidity dries up.

Market maker brokers always say that requotes are due to high volatility and that not order can be guaranteed to be filled at the desired price. The problem is that market maker brokers have dealers with direct orders to do requotes when “needed”.

Forex broker requotes

The issue is that all requotes in the forex market are against the customer.

It is the same with slippages.

An honest broker will apply positive and negative slippages (there are brokers that do it).

In the same way, market makers should apply positive and negative requotes. But, normally you do not see that.

Requotes in favor of the customer should be almost as common as those against.

For instance, in the mentioned example, a market maker will requote the trade at 1.3555 because when the trader placed the order when he saw 1.345, the market moved too fast for the order to be filled at the desired price.

Let´s suppose, another trader sends a market order to buy at 1.3555, and the market moves very fast again to 1.3545. The market maker will quote 1.3555, not 1.345. That is obviously not a fair practice, yet it has been done millions of times.

Forex trading requote

The tactic used by market makers is to do a lot of requotes in very strong bull or bear markets, when a lot of traders are betting in the same direction. They will always requote against the trader. Other brokers just increase the spread.

As with slippages, there would not be a problem if requotes were reciprocal. After all, a fast market is a fast market, and we do not know at what price we will be filled, either with limit or market orders.

Some market makers are suspected of using this technique to disable good traders.

When a trader is doing very well, the market maker will assign a personal dealer to him. From then on, requotes and platform freezes are very common.

When a trader sees something like that he should run away and go somewhere else.

How to solve the requotes problem?

Basically, if we use a market maker (there are good and bad ones), we should not expect many requotes very often. Some requote from time to time should be acceptable. However, if we see that the broker only has requotes against the trader, maybe it is time to choose another broker.

Likewise, we should denounce those practices in the internet community, so scam brokers have more troubles.

Another way of solving this issue is not over trading, and doing it preferably not close to news announcements.

The best we can do is to apply swing trading techniques using the daily and long-term charts. Doing so, requotes should not be a big problem. That is a thing more related to scalpers and day traders. But, day traders will have a lot of problems to be profitable. Requotes is just one of them.

Fortunately, most of the best market makers do not do these practices as before.

The main regulators like NFA and FCA are closely monitoring that brokers do not do this “techniques”. That is why we should always choose a well regulated broker.

 

Thanks for reading and sharing.