Are your strategies safe from your broker?

R

Remiraz

For a brokerage having say 10,000 clients. If at least 10 of them are consistently profitable, wouldn't it be a bit tempting to mimick their strategy?

I mean, they got records of everything from entries, exits, position sizing to stop losses.

Wouldn't it be easy to figure out the strategies of their successful clients and use it for themselves?

So...are our strategies safe from our brokers? :eek:
 
What I would do if I could get away with it is fade the losers. Since most of your accounts would be losers just take the other side of their trades. Any traders who are profitable you send to the exchange and settle for the commissions.
 
Quote from Remiraz:

For a brokerage having say 10,000 clients. If at least 10 of them are consistently profitable, wouldn't it be a bit tempting to mimick their strategy?

I mean, they got records of everything from entries, exits, position sizing to stop losses.

Wouldn't it be easy to figure out the strategies of their successful clients and use it for themselves?

So...are our strategies safe from our brokers? :eek:
More...

I worked for a day trading broker.

They contacted one of the very few profitable traders, and are about to start a new asset management division with him.

With the other profitable guys, they are going to start a kind of tournament: they've contacted 4 or 5 of them, I think, and organized a friendly competition between them. They are going to trade for one month "against" each other, and the winner will get some prize, and his results will be published on the company's web page, so all the newbie traders will be amazed by what's possible and generate plenty of commissions as a consequence.

Oh, and btw: what a broker makes with commissions is generally far more than what they could make with prop trading. Many so-called hedge funds offering managed accounts are doing exactly that, generate commissions...
 
Quote from virgin:

Riskmanager,



Is that a famous daytrading broker ?
More...


Nope.

Their commissions were very competitive btw, partly superior to interactive brokers'.

And still, 90-95% of their futures traders, and 70-80% of their Stock/CFD-traders lose money on average...
 
Quote from easyrider:

What I would do if I could get away with it is fade the losers. Since most of your accounts would be losers just take the other side of their trades.
More...

This is why market makers take the other side of order flow.
 
Quote from Riskmanager:

Nope.

Their commissions were very competitive btw, partly superior to interactive brokers'.

And still, 90-95% of their futures traders, and 70-80% of their Stock/CFD-traders lose money on average...
More...

Actually, almost everyone has superior comms compared to IB. IB's rates are higher but they have a free API, allow trading all instruments in one account and cheap data.

I still wish I have lower comms though. :p
 
I'm still thinking about this topic.

For those 5-10% who are making big bucks trading...wouldn't brokers be tempted to try and reverse engineer their strategy?

I try to think from the point of view of a brokerage. If I were running a brokerage I would...

1) Make big bucks earning the comms of my clients.

2) Scan mthly accounts statements to find the 5% that are successful. Then try to reverse engineer their strategy.
 
I'm tempted to believe that the risk would be too high for a brokerage house in simply following/fading the actions of any particular individual. So, why take risks when commissions are guaranteed?

Also, I would think that a very profitable trader (millions of shares per month and maybe .05 per share traded profit would be this IMO) would most likely not be trading retail via a brokerage house...

Mike
 
Quote from Remiraz:

I'm still thinking about this topic.

For those 5-10% who are making big bucks trading...wouldn't brokers be tempted to try and reverse engineer their strategy?
More...

What if your strategy involves 17 indicators and half of what you
do is discretioanry to boot? Especially how you scale in and out?

And you change your indicator parameters each time you backtest?

How would they know when you have done this?

And the amount of contracts you enter/exit with at any point changes
with the wind depending on how the day is going?

How in the heck would they figure this all out?

(This is just one hypothetical scenario).
 
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