I'm not saying it can't be done.
I'm asking how the money will be accounted for.
I'm asking how the money will be accounted for.
Can your broker follow you if you get good results?
- Thread starter anders888
- Start date
Not sure what you are saying. The "fraudster employee" can just use his own trading account setup to automatically execute trades following yours. Can this be done?
Sure. There is a log tracking all activity. Trades initiated internally would be a bit strange, don't you think?
Let me put things in perspective. When I decided to quit the corporate life, I did nothing for 6 months. Then I decided I wanted to learn to cook and blog about it. So I posted my recipes on my site.
One morning 2 Goldman Sachs staffers were chatting about my top ranked (in Google) recipe. Sitting in Bangkok, I could tell that. You really think the compliance people in IB can't tell if a rogue employee is doing what you say?
Edit: the staffers were in the New York office, sorry, should have been more specific.
Let me put things in perspective. When I decided to quit the corporate life, I did nothing for 6 months. Then I decided I wanted to learn to cook and blog about it. So I posted my recipes on my site.
One morning 2 Goldman Sachs staffers were chatting about my top ranked (in Google) recipe. Sitting in Bangkok, I could tell that. You really think the compliance people in IB can't tell if a rogue employee is doing what you say?
Edit: the staffers were in the New York office, sorry, should have been more specific.
2+1 weeks ... do you think this makes a significant sample size? how much backtest have you done, and what is the worst performance decline in 1 week from the prior 2 weeks?
You just started trading that system, and think after 2 weeks of good performance your broker or a broker`s employee would deem your trading performance good enough to copy your trades? I don't think so.
Sounds more like normal variance in system`s performance
@anders888: You have mentioned at least three very different scenarios in this thread: 1) front running, 2) tailing, and 3) analyzing trades.
1) "Front running" is when someone slips a trade in front of yours to get your price. This is illegal for the broker to do. I haven't heard of a case in recent times, because people go to jail for this. Front running is probably not illegal for third parties, such as high-frequency traders, but it is a problem that needs to be addressed. You're probably not going to get front-run unless you are doing significant size.
2) "Tailing" is where someone follows your trade. This is the best thing that could happen, and you should thank them. The only time I can think of when you wouldn't want this is when you are selling signals, and somebody is getting them free by spying on you.
3) "Analyzing trades" is when you have found a recurring bit of inefficiency in the market. Somebody could figure out when/where that inefficiency exists and develop a system to exploit it. This is a reasonable concern, but I don't know what you can do about it. It is unlikely a broker employee would have the skill and capital to figure out your "secret sauce" and build a system that kills it. It is not your system that is at risk, rather it is the inefficiency that your system targets.
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Not to say that it would be impossible, but I think it would be very unlikely that a broker would be copying or paying any attention to your trades in a small-cap low volume stock. I think Etrade/IB are way too large and regulated.. I wouldn't think an employee would be able to arbitrarily access customer trades without leaving some sort of obvious paper trail, and even if that weren't the case, they're more likely going to monitor guys making high probability infrequent trades (e.g. maybe corporate insiders, etc), or maybe if you're a known stock promoter or something.
I think if you're experiencing slippage, there are much more likely explanations. The main thing that stands out to me is the fact that you only have 2 weeks of real trading. I don't think that's nearly enough sample size for you to draw any kind of conclusions. Knowing nothing else, I would discount your backtesting performance, and assume that you were batting above your mean for 2 weeks.
I do think you'll find a difference with executions at IB and Etrade. Etrade sells its order flow, so one of G1 Execution (owned by Susquehanna), Citadel, KCG, Citigroup, etc. will get to act on your order, so if they wanted to front-run you, they certainly can. I definitely get lower quality fills when I use Ameritrade and am trying to take displayed liquidity. I don't know if this is some sort of systematic front-running, or more likely HFT phantom liquidity. Anyway, Ameritrade/Etrade do not send anything in the order that would identify the account that's sending the order. Anyway, just know that you're the lowest part of the food chain, but I don't think there's an entity that singling you out as a "profitable trader" and front-running your order. If you see something unusual, it's more likely systemic on all retail traders using that broker.
I think the only time I'd want someone tailing my trade is in a pump&dump situation and the followup trades can help push up the price and/or generate enough volume for me to sell into. In cases where I have real edge, I think having anyone else on my side of the trade, especially people who are trading with the same time frame and mindset, would erode my edge.