Activ Averaging Allegedly Protects Your Stops

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I've had a live account with London based broker ActivTrades for quite a while now.  It's one of their "Standard" MetaTrader 4 accounts. I opened it because it offers micro-lots and lots of exotic currency crosses, along with a wide range of non-forex instruments, including stock indices, gold, oil and other commodities too. That combination is a little hard to come by at other brokers.  It is slightly old fashioned however, in that it still uses 4 decimal places and fixed spreads. 2 on the FTSE 100 and 3 on GBP/USD for example, most of the time at least.

Recently ActivTrades announced that they were now offering micro-lots on their "Interbank" accounts as well. These use variable spreads with 5 DPs, so I opened one of them too.  I haven't funded it yet, because I was waiting for a long standing EUR/USD trade on my Standard account to take profits before transferring some cash over to the new account.

My take profit order is (still!) a sell limit at 1.3260.  The high bid price on my ActivTrades Interbank account yesterday was 1.32613. That account is still not funded. My take profit order on my ActivTrades Standard account never got filled. Why on Earth not you may well be asking yourself. I asked ActivTrades that very question yesterday but by this evening I still hadn't received an answer, so I called their London number.

I spoke to Alessio Falanga, the senior manager available at ActivTrades when I called. He explained to me that the reason my Interbank account was still unfunded was the averaging algorithm that ActivTrades insert between the prices available to them from their different liquidity providers, and the prices ActivTrades feeds to their Standard MT4 clients.  According to Alessio this algorithm "smooths out spikes" in the ActivTrades price feed and can benefit their clients, since a spike that would take out a stop-loss on an Interbank account, might not do so on a Standard account.  It was just unfortunate that in this case the algorithm, which Alessio told me generally causes price differentials of 0.5 to 0.9 pips between the two accounts, had in this instance created a differential of 2.3 pips to my disadvantage.

Here is yesterdays EUR/USD chart courtesy of my ActivTrades Interbank live account:

ActivTrades Interbank account high bid of 1.32613

ActivTrades Interbank account high bid of 1.32613

Here is yesterdays EUR/USD chart courtesy of my ActivTrades Standard demo account:

ActivTrades Standard account high bid of 1.3259

ActivTrades Standard account high bid of 1.3259

Here is yesterdays EUR/USD chart courtesy of my FXDD demo account, another MetaTrader 4 broker that provides fixed spreads with 4 DPs:

FXDD fixed spread account high bid of 1.3261

FXDD fixed spread account high bid of 1.3261

It looks like FXDD must use a different averaging algorithm to ActivTrades, doesn't it?

If any of our readers can supply a chart from any MetaTrader broker that shows a high of less than 1.32600 for EUR/USD for August 3rd 2010 we'd be delighted to add it to our series of illustrations. We haven't been able to locate one ourselves.

We'd be even more delighted if any of our readers can supply us with illustrations of a case where ActivTrades averaging algorithm has worked in their favour. Failing that maybe ActivTrades themselves can do so?

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Comments on Activ Averaging Allegedly Protects Your Stops Leave a Comment

August 5, 2010

betelgeuse @ 11:29 am #

Very interesting. I am curious if they action is legal or not. It seems to me "a 'kind of' averaging of the prices" that should not be possible.

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