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I'm doing some statistics in order to evaluate the Forex market profitability.

I first define what I call "regeneration of the market".

For example, the following fictive order-book of EURUSD:

ASK:
20M 1.10010
 8M 1.10005
 2M 1.10002
 
BID:
 1M 1.99999
 9M 1.99995
15M 1.99990

Spread for 10M: 0.00010

If I open a BUY position of 10 millions, the order-book will be the following:

ASK:
20M 1.10010
 
BID:
 1M 1.99999
 9M 1.99995
15M 1.99990

Spread for 10M: 0.00015

I call the market "regenerated", when there is again a spread of 0.00010 for a 10M position.

The spread of 0.00010 is fictive, I don't know what is the average spread for 10M positions.

So, just after having opened a position, how much time a trader will have to wait before there will be again the average spread for a 10M position ?

I know it is hard to give a precise answer, but I would like to have an approximation or an average.

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    $\begingroup$ It is a very good question. But you know of course that there is no centralized order book in the FX market bis.org/publ/qtrpdf/r_qt1912g.pdf $\endgroup$
    – nbbo2
    Commented Mar 28, 2023 at 11:46

1 Answer 1

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let's start with a couple of errors in your question:

  • you cant have the best bid at 1.99999 and the best offer at 1.100002. I guess you meant 1.09999
  • as said in the comments there is no centralized order book in FX. You can aggregate them but beware of mirage liquidity (same orders lying in several orderbooks)
  • some orderbooks have different minimum tick sizes. main ones in eurusd are quoting in 0.5 pips, so you couldnt find any price like 1.10001, it will be 1.10005 or 1.10000.
  • in FX it s easier (and the best practice) to speak in pips (10-4 for EURUSD). In your orderbook, the top of book spread is 0.3 pips. But the spread for 10M is 0.9 pips.

To answer your specific question, speed of replenishment is very volatile and with a high level of seasonality, specially intra day; so it s hard to give you a specific answer.

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