The best thing to do here is read all the stickies from the broker section ofnigeriaforextradingin regards to the liquidity query.Originally Posted by ;
I totally get what you are getting at here but the reality is that it only really matters with prime brokers and bank trading platforms such as currenex via ODL or Bank of America and these. The main reason is that the difference between the way the market maker and the way the true ECN operates. When you begin dealing with a genuine ECN then the dimensions and construction of thier liquidity pool becomes an essential factor in markets which are slim, fast or when you are trading dimensions.
As far as market manufacturers prices go, it is actually a their choice as to what they reveal you. Their prices might be a composite of their liquidity providers, one of thier liquidity providors (or in some cases)-their only liquidity provider. The thing which makes this interesting is that just because a market maker is your biggest or has the most significant liquidity pool does not neccessarily mean they will show you the market. In fact many make considerable profit by showing you market while covering your trades in a different at a better price.
The key to this is understanding how to fight this. Understanding how to quantify a brokers pricing and price movement. The best way to do so is to have access to multople brokers. You can do this by having many demos or possess a charting system like e-signal which has price feeds from dozens of major banks and brokerages.
You ought to look at these composites and eliminate prospective candidates when their feeds always lag behind or trade outside the majority. Another fantastic thing to search for is alot of small increment varies in the price action. A common broker practice is to smooth out price movement. Meaning that while some other brokers may have a tick shift every second or so, a smoothing broker might just hold the exact same price until the price has moved 4 or 3 pips then they ch up. Elimanate the brokers who practice smoothing. This is evident price feed manipulation and is a indiion of more problems to come.