Protecting successful trading strategy

Have you ever tried to reverse engineer something? It is not easy to do. And if you did manage to reverse engineer a trading system how do you know that you have all the rules and that it will work in the future?

How is the broker going to tell the difference between a skilled trader and a lucky one? What if the profitable trader uses a discretionary method?

Brokers stick to being brokers because that is the business where they make their money.
 
Quote from jeb9999:

Have you ever tried to reverse engineer something? It is not easy to do. And if you did manage to reverse engineer a trading system how do you know that you have all the rules and that it will work in the future?

How is the broker going to tell the difference between a skilled trader and a lucky one? What if the profitable trader uses a discretionary method?

Brokers stick to being brokers because that is the business where they make their money.
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i agree...especially when you add in the ever so slightest amount of discretion. i think it becomes near impossible. if i owned a broker i would not even bother trying to figure it out. i would just take the same trades....but then again if i was making dumptruck loads of cash just charging commisions which are 0% risk.....i wouldn't even bother. why expose your company to risk when you can make cash without it?
 
there is the broker and there are people working for it... the broker may not want to try to screw you, but i would not trust its employees...
 
Quote from IShopAtPublix:

If someone can *easily* figure out your "secret" it is not an edge.

Of course brokers would monitor what you are doing but only if you get to Warren Buffett level. If they see an account go from 1000 to 100 million in a short time you can be sure *somebody* will be looking at it. If you ever get to billionaire level you can just buy the broker or have your own and that way your secrecy is assured.
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Thats one of the most ridiculous things I've heard. An edge is defined by it's profitability, NOT it's simplicity.

As for the brokers, I've heard enough tales and nothing would surprise me.. Better to assume someone wants your strategy (cos let's be honest, I would) and will attempt to coat tail or reverse engineer it.

And if you ever get to Billionaire level (extremely doubtful), You'll most likely be trading so large size and long term, they'll lose patience waiting for your next trade..
 
one way to protect your strategy is to use multiple brokers, and open and close the position in different brokers. this works pretty well if the position is a basket of a few stocks, thus diverse the stocks among different brokers. I am curious how James simon protects his strategy? does his firm trade through brokers or he clears himself?
 
If you do have a very consistent strategy I don't think there is anything wrong with being paranoid. Somebody in that back office will be looking at all your trades.

Having said that, I don't think it would be very easy to figure out what you were doing if you're trading multiple stocks each and every day. And how do they know what you're basing your trades on.

But yeah, nothing wrong with being extra secretive, you never know.
 
The best way to hide something is to hide it in plain sight. One account among tens of thousands is unlikely to generate much interest. Even if you are unusually successful, what it the probability that yours is near enough the top to get their attention? And even if it did, so what? What have you really lost? I've not seen many strategies among retail traders that could be scaled sufficiently to ruin the developer's ability to succeed.

I actually take the opposite approach. I provide extensive information on my method and let people pick it apart. It makes me think deeper into my assumptions and permits me to understand it in more depth and engineer solutions for vulnerabilities that were exposed. I think I get more than I give through this process.
 
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