I hope the max damage (benefit in other words) is the mirroring; and they do not go to the extent of reverse engineering.
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Broker against profitable strategies
- Thread starter shh
- Start date
I hope the max damage (benefit in other words) is the mirroring; and they do not go to the extent of reverse engineering.
Suggested reading: https://www.webmd.com/schizophrenia/features/why-feel-paranoid#1
Was that useful for you? Does the paper stand the test of time
Hi Guys, I am a new member but I have been reading the forums for over 5-6 years, and I appreciate anyone who has constructively participated and shared info.
My questions:
1-Would brokers such as IB identify consistently profitable traders, and eventually trade against them or at least lift liquidity ahead of them?
2-What markets could be safe from the practice above? Could I assume that in deep markets such as ES/CL and major forex pairs IB cannot move the market much to shake me out or to jump-in in advance?
3- Could I eliminate the issue by not using limit orders? This way I can cut off their front running, but still they are able to move a thin market against me to shake me out, but could they do it in deep markets also?
4- What practical solutions do you recommend? For instance, should I avoid overnight ES/CL due to lower volume or would you suggest letting go of intraday and focusing on swing trading instead since the broker has less power to shake those?
5-Is the ultimate solution renting a seat at the exchange? Or even there the mechanics are designed such that a central hub can monitor and take advantage of the orders/strategies.
Best Regards,
shh
Based on your OP it is obvious you do not trade live yuor system yet. Your main concern should be if the system works with real money. The rest are technicalities you can work out.
Suggested reading: https://www.webmd.com/schizophrenia/features/why-feel-paranoid#1
This link does not guarantee that it will not happen. Almost on a regular basis SEC/CFTC bring people to court for things they are supposed not to do. But the fact they do, proofs that not everything can be put under paranoia. Not everybody follows the rules all the time.
Till a few years ago everybody was sure email was safe. Till the NSA got exposed.
You should read this: https://en.wikipedia.org/wiki/Naivety
I remember vaguely that many years ago a famous company (forgot the name) in the US manipulated their software that was used for quoting prices for some future energy contracts. A client found it out by accident. Each time when he hovered with his cursor over the buy or sell price, the price changed and became more expensive; the buy went up and the sell went down. When the cursor was not on the buy or sell, the correct market prices were quoted. It was filmed and shown on internet.
Brokers should follow the rules?These people didn't.
Read this one: https://en.wikipedia.org/wiki/MF_Global
or this one: https://en.wikipedia.org/wiki/Refco
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There's a difference between reasonable caution and being paranoid that an organisation several thousand times your size would try to front run your trades on the basis that they thought you were profitable.
Front running is and always has been about getting in front of large orders. Saves you the bother of knowing whether the originator knows what they're doing. So yeah if you're about to send 10000 lot sell order on ES you might want to be careful. No one cares about your 50 lot.
Front running is and always has been about getting in front of large orders. Saves you the bother of knowing whether the originator knows what they're doing. So yeah if you're about to send 10000 lot sell order on ES you might want to be careful. No one cares about your 50 lot.
This link does not guarantee that it will not happen. Almost on a regular basis SEC/CFTC bring people to court for things they are supposed not to do. But the fact they do, proofs that not everything can be put under paranoia. Not everybody follows the rules all the time.
Till a few years ago everybody was sure email was safe. Till the NSA got exposed.
You should read this: https://en.wikipedia.org/wiki/Naivety
I remember vaguely that many years ago a famous company (forgot the name) in the US manipulated their software that was used for quoting prices for some future energy contracts. A client found it out by accident. Each time when he hovered with his cursor over the buy or sell price, the price changed and became more expensive; the buy went up and the sell went down. When the cursor was not on the buy or sell, the correct market prices were quoted. It was filmed and shown on internet.
Brokers should follow the rules?These people didn't.
Read this one: https://en.wikipedia.org/wiki/MF_Global
or this one: https://en.wikipedia.org/wiki/Refco
Thanks schweiz, I remember a story (related or unrelated) you be the judge please. I started trading futures with this shady company PFGBest and lost money. Then, I identified some reliable momentum strategy and took action on Soybean Meals futures. I was naive and arrogant then and I over-leveraged, but the pattern was so reliable that I had conviction it would work out. Prior to my entry the Soybean meal market was calm, when I entered however, the market tested every level that a normal technical trader would consider panic zones and would exit. I did not use any stop losses (my stupidity). But that market suddenly got way more violent than its norm. Have you ever experienced that market behaves more erratic specially when you leverage up? Seems the moves against you get exaggerated not just capital wise but also in terms of the anti-move size itself.
One could criticize and say that's because of my sub optimal entries, but it does not happen when 1-I am not taking a trade & 2-I am not leveraging.
The condition 1 & 2 must coexist for this type of odd behavior to happen. I suspect it does not have to do with my psychology and has more to do with some system sniffing my potential vulnerability.
p.s. that trade became enormously profitable (relative to my account size). The broker called me from Chicago and wanted to talk to me on the phone and invited me to their office and gave me a tour. Meaning they notice when someone is abnormally profitable. They do not know if this is skill/luck/info. So, they try to get to know you alittle bit.
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There's a difference between reasonable caution and being paranoid that an organisation several thousand times your size would try to front run your trades on the basis that they thought you were profitable.
Front running is and always has been about getting in front of large orders. Saves you the bother of knowing whether the originator knows what they're doing. So yeah if you're about to send 10000 lot sell order on ES you might want to be careful. No one cares about your 50 lot.
Thanks for the reply man. I am not even at 1/100th of that size, so as you say I should be less concerned.
Please also read my reply to schweiz, do you think if some systems could sniff vulnerability? at least temporarily I mean.
No I don't. That's why I posted that webmd page partly as a troll...
Seriously the market's randomness will find you out and test your mental stability. There's a reason why traders tend to have so many bonkers opinions. They've projected the randomness and apparent vindictiveness of the market onto the world. It's a sad place to be. Don't give in to it.
Seriously the market's randomness will find you out and test your mental stability. There's a reason why traders tend to have so many bonkers opinions. They've projected the randomness and apparent vindictiveness of the market onto the world. It's a sad place to be. Don't give in to it.
1-Would brokers such as IB identify consistently profitable traders, and eventually trade against them or at least lift liquidity ahead of them?
Why would any broker want to trade against a profitable trader? That wouldn't make any sense, if anything they would trade with a profitable trader.
Let's assume that (hypothetically) your broker identifies you as a profitable trader, and creates an algo to track your activity and buy/sell for their own account immediately after you do. (I'm going to discount front-running here as it's blatantly illegal, and unlikely to be something a legit broker would dare attempt). This can't possibly be anything but beneficial to you: when you buy the broker is buying right behind you thus pushing the market in your direction, and they aren't selling until you've already sold. It would actually amount to a free guaranteed edge for the trader.
Now, in theory a broker could try and run your stops or force you out of your positions at a loss, but if you're a profitable trader then it would be stupid to attempt this. Since you are right in your positioning more often than not, by definition they'd be fighting against the whole market.
No I don't. That's why I posted that webmd page partly as a troll...
Seriously the market's randomness will find you out and test your mental stability. There's a reason why traders tend to have so many bonkers opinions. They've projected the randomness and apparent vindictiveness of the market onto the world. It's a sad place to be. Don't give in to it.
Thanks I appreciate the sincerity. Yeah could be the damage of all these years. The accumulated damage actually.