Broker Could Steal Your Strategy???

Quote from ChadZ1:

So I didn't know where to put this, but figured those of you trading for a living might have shared this concern.

This is probably paranoid, but imagine you come up with a very successful trading strategy and have consistently had GREAT returns for a number of years. Is there any reason to be concerned about your broker noticing your great returns and trying to copy your trading strategy and thus ruining it? Or, perhaps, if they can't figure the strategy out, and if they're one of the electronic brokers, they might just tell their system to make the same trades every time you place them except have their system put in their trades first.

Is there cause for concern? I realize one might say there's nothing to be worried about because you'll never come up with a strategy so good that others would notice you above everyone else and want to copy, but hypothetically what if you did? Are there ways to protect your strategy?
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Hi ChadZ,

I haven't read the thread so excuse me if you have already got this answer.

There is nothing to be concerned about. Your broker makes money off of your commissions and thus wants to keep you happy so you keep using his service. The broker also wants to you accumulate assets so you generate more commissions for him.

What will actually happen if you have long term successful performance is the broker will shop you around to the asset allocators in order to increase your assets under management and thus generate more commissions for his pocket.

You will become bigger and bigger with almost no initial effort on your part.

You can be assured that the broker will do this because if he doesn’t he knows his competition will and if he doesn’t beat them to the punch you will be lured away and he will lose everything.

As I said on the “What’s the difference between trader and portfolio manger?” thread: “Talent is not invisible………There is no invisible white whale in finance.”

If your performance is good the broker will be trying his best to keep you rather than steal from you.

The fact is if you are good your problem will be trying to figure out your asset capacity rather than a broker risking losing your business while he attempts to reverse engineer your methodology.

All the best.

Warmest Regards, Smoker
 
OK, use common sense,

If your strategy is automatic, yes, your broker can steal it if it wants to.

If your strategy is discretionary, No, nobody can steal it, it's inside your own head.

The good thing is that few of the automatic strategies can perform better than 50% of the time, so nobody will steal any automatic strategy.
 
Seen this before.

No broker could steal your strategy if you're smart enough to send a read only file.

<b>Knowledge of exact executions does not allow your broker to copy anything, beause it's just as unknowable if you can't see the code. Also, mere knowledge of intervals or bar parameters does not allow you to copy strategies.<b>

<b><i><u>Seeing codes is the only way someone might "steal your strategy."</b></i></u>
 
Quote from bwolinsky:

Seen this before.

No broker could steal your strategy if you're smart enough to send a read only file.

<b>Knowledge of exact executions does not allow your broker to copy anything, beause it's just as unknowable if you can't see the code. Also, mere knowledge of intervals or bar parameters does not allow you to copy strategies.<b>

<b><i><u>Seeing codes is the only way someone might "steal your strategy."</b></i></u>
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Wat About reverse engineering ?
 
It is far more likely that a broker will "trade the other side" of your strategy doing internal fills and not going out to the market ---- then it is for a broker to "steal your strategy" and use it.

The broker would probably discover your strategy via pattern recognition and rob you blind by taking the other side of your trades at bad pricing.
 
Quote from ChadZ1:

So I didn't know where to put this, but figured those of you trading for a living might have shared this concern.

This is probably paranoid, but imagine you come up with a very successful trading strategy and have consistently had GREAT returns for a number of years. Is there any reason to be concerned about your broker noticing your great returns and trying to copy your trading strategy and thus ruining it? Or, perhaps, if they can't figure the strategy out, and if they're one of the electronic brokers, they might just tell their system to make the same trades every time you place them except have their system put in their trades first.

Is there cause for concern? I realize one might say there's nothing to be worried about because you'll never come up with a strategy so good that others would notice you above everyone else and want to copy, but hypothetically what if you did? Are there ways to protect your strategy?
More...

In my experience, it doesn't seem like you can really prevent this over the long haul. In my prop shop, ideas float around and you can literally see everyone doing similar things and the guy who makes the most money just tends to do it better than everyone else and/or has more buying power. The guys at the top see who does what and they try to replicate it, so you see subtle edge degradation over time.

And before I was at this prop shop, it was common to see programmers and traders leave and go start their own attempts at competition once the non-compete agreements expired. So, I think the moral of the story here is that you don't have a choice but to keep innovating and making sure your method is the most adaptive and most responsive to changing market conditions.

Oh, and punish the hell out of other traders when they are wrong and you know they are wrong. :-)
 
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