Forex AUD/USD forwards spike 14-6-05???

[Smurf1976]

Can anyone who trades forex or who otherwise has the data confirm what's going on here...

I had open a forward contract dated 15-Nov-2005 sell AUD / buy USD (so I'm bearish on the AUD).

Whenever I have checked the forward rate has been considerably less than the spot rate. Right now it's -0.0067 so about 76.5 cents spot or 75.83 forward for November 15. OK so far.

My stop loss was taken out on the 14th of June at a level significantly ABOVE the highest point reached by the SPOT price on that day. Now, for this to happen the gap between spot and forward rates would not only have had to narrow, it would have had to reverse.

This wasn't the case (reversal of the gap) when I looked at the market on that day and it isn't now so it must have been a pretty quick movement.

What I'm thinking is that the broker has done something funny. Can anyone confirm what actually happend in this market yesterday? I have sent the broker an email asking for an explanation but would like to know if I'm right or not since they will probably phone tomorrow (well, they're always phoning with promotional offers so I guess they will respond to my email).

Thanks.

 

[reichstag911]

Smurfster,

will help u if i can.

by 'forward contract' - do u mean you are trading the front month futures contract based on the AUD ?

If so then this is via the SFE of course

But u want prices of AUD FX on a certain date ?

yes ?

 

[reichstag911]

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[Smurf1976]

Smurfster,

will help u if i can.

by 'forward contract' - do u mean you are trading the front month futures contract based on the AUD ?

If so then this is via the SFE of course

But u want prices of AUD FX on a certain date ?

yes ?

Not quite...

I'm certainly no expert on the trading aspect of forex but wanted to do some trades based on what I know about the various currencies themselves. So I just have an account with a forex broker that trades on margin.

The broker lets you day trade, in which case a "renewal fee" or something like that is charged each day if you keep the contract open, or alternatively you can trade "forwards" for any date up to six months ahead.

It did occur to me that there are some risks here so I'm not blaming anyone but myself BUT whenever I checked the spread between the spot rate and the forward rate it has always been fairly constant for a given duration. For example, for 15th November right now it's in the order of -0.0067 for AUD/USD so if the spot rate is 0.7650 then the forward rate for that date is around 0.7583. Make sense? This gap decreases over time which if you are short represents a loss to the trader (but it seemed like a cheap way of doing it).

Anyway, like I said I have never really seen the gap between spot and forwards change much if at all on a day to day basis. So I was really surprised to find my stop taken out. It was set at 0.7705 so if the spot/forward spread had remained fairly constant it would have had to go to about 0.7772 to be taken out.

Now, I can accept that maybe the spread moves around a bit, but even the spot rate did not reach my stop so unless the spot/forwards spread has in fact reversed then something funny has gone on. It was about -0.0067 not long before the stop was taken out and is about that level now. So it must have been a pretty quick spike.

I am suspecting that the broker (who I admit do seem to be a bit questionable but in fairness I won't give any names until I have proven it one way or the other) has been up to something funny here. Either way, I lost my margin whilst the market effectively moved nowhere with just a bit of a spike that didn't seem to reach my stop.

I've emailed them asking for an explanation and was just hoping that someone could tell me if what has happened is reasonable or not so I know who is right/wrong. All of the charts on thier site and other websites etc. don't provide any explanation, hence my suspicions about the broker.

Thanks.

 

[Smurf1976]

No need to worry!

The broker has admitted that they made an error and wrongly closed my position. They have now reopened it and working out how much $ to send me to cover costs, market movement etc.

Moral of the story is CHECK YOU BROKER'S ACTIONS. Don't assume that just because it's all computerised they don't make mistakes - they certainly do!

Thanks for your comments reichstag911.