That is a dream that almost never happens. First reverse engineering is not easy, second if he has already access to the trades, why bother with any kind of engineering instead of piggy backing?
Broker against profitable strategies
- Thread starter shh
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That is a dream that almost never happens. First reverse engineering is not easy, second if he has already access to the trades, why bother with any kind of engineering instead of piggy backing?
This is not going to be an edge for too long because the counter parties of our trades do NOT like to lose and they usually have enough money to drive the market in any direction they want, so sooner or later the combined trade volume will become noticeable and will become a magnet/target. Btw, I'm talking about forex
billv, I 100% agree with you. This "mirroring you magnifies your success" mentality is very dangerous. 1-They overcrowd the trade by mirroring, 2- The levels become more noticeable 3- This will create a new incentive for the market makers to play against levels that were not as rewarding before. I think you and I see one layer beneath what most posters are thinking here.
Do you think the challenges above can somehow be managed? Leasing a seat on the exchange solves #1 and #2, but if a trader (institution) get large enough, would it not eventually become a prey to the market maker?
Thanks for your thorough thinking.
Well, this has crossed my mind but I don't know if we should be paranoid about it
Here are some ideas.
- Assuming we use Metatrader 4, we could place our trades in a demo account and then automatically copy trade them to our live accounts,
- Every now and then we stop trading, we transfer our funds to a new live account and start trading the new trading account.
- We could also switch our trading every month to a 2nd or 3rd live account with a different broker,
Now regarding our volume being large enough to become noticeable, IMO it would depend on:
- What instrument we trade
- The duration and profitability of our trades
- Who the liquidity provider is
- Our trading hours (London is probably the best time for being invisible)
I don't know what else to say, if you are too concerned about being visible, you could trade small volume but trade it more often.
Well, this has crossed my mind but I don't know if we should be paranoid about it
Here are some ideas.
- Assuming we use Metatrader 4, we could place our trades in a demo account and then automatically copy trade them to our live accounts,
- Every now and then we stop trading, we transfer our funds to a new live account and start trading the new trading account.
- We could also switch our trading every month to a 2nd or 3rd live account with a different broker,
Now regarding our volume being large enough to become noticeable, IMO it would depend on:
- What instrument we trade
- The duration and profitability of our trades
- Who the liquidity provider is
- Our trading hours (London is probably the best time for being invisible)
I don't know what else to say, if you are too concerned about being visible, you could trade small volume but trade it more often.
I appreciate your input. I personally would not do the first 3 points, because I am afraid that they expose me even more.
But your second 4 points are very valid.
One other glimpse of hope is that for the market maker to hit certain levels, he's gotta move the other related markets and that's going to be a super hard task perhaps.
It needs more thorough thinking but right now I am considering the situations below:
a)If you enter your position prior to market maker establishing his levels, then size matters, then broker mirroring you will matter, then you want to be as hidden as possible.
b) if you enter position with or after the market maker establishing his levels, then mirroring might even help (MIGHT), still the net impact is that market maker does not have any incentive to trade against his established position anymore. e.g. he's not going to shake the market for your 2000 lots, when he has 30,000 lots on the poker table already.
So it is context dependent.
once again any other input from you or other members is appreciated.
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My understanding is that a market maker would not be interested to mirror our trades.
I agree, however, in order to trade 2000 lots we would need to have a very large trading account
and as such we would also have to consider the safety of our funds.
I would be reducing this risk by diversifying and placing trades through several brokers.
This would make our trades less visible and it would help with liquidity as well.
Yeah broker diversification in the context of asset protection is important. I personally have the experience of PFGBest going bust, after some traders (with/without consent from the upper managers) martingaled on losing positions to the point that eventually they could not carry and margin calls busted the entire system.
I can see over 300,000 trading accounts at my work. Too hard to track someone doing a quantitative strategy since there's a time delay though definitely do take notice of what positions are in the big client accounts. Nothing wrong with that. If you have a client that has beaten the S&P for over 5-10 years and has over 30 million in an account. You bet employees are going to look at the positions that they are holding. You just can't front-run their orders or impact best execution quality. Copying their ideas after the fact is okay.
Thanks for explaining your side of the business.