A Comparison of Forex Brokerage Data

Here is a first look at forex brokerage data on a side by side basis. For many beginners who just started trading Forex, this is a very good introduction into the world of dealer market data.

Our Chart

Here is a chart that shows the spot rate EUR/USD from both EFX Group and FXCM .

I have added the volume indicator for both data series to show how frequently they were updated in real-time, and also the difference between the quoted last bid prices of the 2 data series on each minute.

FXCM Data vs EFX Group Data

First, it is very obvious that FXCM data is updated less frequently in general comparing to EFX Group data based on the volume graphs.

Second, the closing prices on a per minute basis are frequently not matching based on the data we have collected.

Why is there such a difference?

The data reported by both brokers are correct. Each brokerage is reporting the bid and ask information they obtained from within the dealer network. For Forex trading, there is no centralized exchange for the reporting of trades, thus you can only see the bid and ask information as presented by your broker.

Time Poll Behaviour

FXCM data is sent out on a classic time poll basis. That means, data is reported to the user based on certain fixed time interval. Thus you are guaranteed to receive some updated price information for each currency pairs, even when the market is not trading or having next to none activities.

On the other hand, if the market is moving very fast, then the quoted prices that you receive from the brokerage may not be reflecting the latest market conditions.

Event Driven Behaviour

EFX Group data is sent out on an event driven basis. That means, if there is a change in the data the brokerage received, it will then send out an update to reflect the change. You are then notified whenever there is a change in the data.

On the other hand, during very slow market activity, you will not receive quotes as frequently as you wanted for making your trading decisions.

Chart Reading and System Testing

No matter you are going to study the charts based on historical data or analyze the data with system testing, use the Forex brokerage data that you are going to trade on whenever possible. That should give you the highest confidence in your chart signals. You will not be surprised by the data when they arrive in a way you are not prepared for.

Practically, long term historical data of Forex are not likely available from the brokerages, thus, it is best that you study the data you have collected from the brokerages so that you can learn the difference between the historical data you have done your home work on, against the data you have collected from the brokerage in real-time.

Summary

Different type of brokerage data is good for difference style of trading. For example, if you try to do extremely short term trades on Forex, like scalping, then time polled data may not be what you are looking for.

On the other hand, if you are trading long term setups or trading systems, then you are probably looking for stable data stream, where time polled data can be more useful for this type of usage.

Make sure you choose the right type of real-time data for your trading requirements.

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