How to prevent brokers from knowing your strategy?

Discussion in 'Forex' started by mcgene4xpro, May 14, 2011.

  1. Hi,

    You play certain strategy and submit orders. Brokers see your prints and they could conclude/reverse engineer your strategy. If this true and you agree, how could you reduce this possibility?

    What are the tactics you will use to prevent brokers?

  2. Why would it matter? Presumably you are hoping that the market goes in your direction after you buy or sell short, so how would having your broker on the same side of the trade hurt you? If they also bought, that would remove supply from the market and if they sold, vice versa. It's a non-issue in any market with a reasonable amount of liquidity.
  3. if brokers know your strategy, he can buy before you buy and sell before you sell.
  4. clacy


    Don't sweat it. These bucket shops are too busy taking money from the 98.5% of losing traders. They do not need to know your strategy or care about it. If for some reason you were able to actually trade profitably for some period of time in Forex (very unlikely), you can move over to an ECN or trade futures if you can scrounge together $10k and open an account at IB.
  5. Hi,

    The thread is not about whether brokers " either ECN or BS" go after profitable strategies/systems and decipher them.

    The thread is about if , in the worst case scenario and it might the most realistic scenario, do that, how could we prevent this to happen?

    Talk about tactics and ways to hide your logic from brokers and please not talk about whether this happen or not

  6. And if you use stop limit orders to force you in or out of the market, that doesn't matter.

    Put it this way, how is the broker's transaction any different from other traders who don't know your strategy but who just so happen to buy or sell in front of you?

    And, if you are going to say "size", consider that a broker is not going to put on a size trade on a reverse engineered strategy from one customer. Even if a broker only has 1,000 customers, that means ~50-100 profitable strategies to choose from for reverse engineering. If a broker puts even 1% of their total equity capital into such trades, that means they are putting between .01% and .02% into the specific strategy you trade. Again, in a reasonably liquid market, this is a non-issue.

    Oh, and if you are so small a trader that you can't trade in a reasonably liquid market and trade forex spot instead, the probability of you having a strategy which the broker wants to reverse-engineer is vanishingly small, so, let's let go of the delusions of persecution.
  7. If a good quant knows your entries and exits and their corresponding times he can reverse engineer close to what you are doing...face it...its all about OHLC (You may be surprised at the geniuses hiding around the internet and never know who they I am not paranoid...just take my word for it).

    To thwart such a thing is impossible...but if you worry about a dealer being able to read your algorithm...there is a disclaimer posted with each update of MT4 stating that your data cannot be read...but I have serious doubts about that. So if you use an expert advisor, remove it at each update..ok this may be a waste of time...but to be careful why not?.

    So in my opinion there is no way to protect your stuff, because all they need to know is your executions and your dealer knows that...The Global players in Retail Spot Forex do not have the scruples or even the regulation to even get caught cheating.


  8. That's like saying, "Let's talk about tactics for hunting unicorns, not whether they exist or not".

    Hey, if you want to spend time on non-issues, no one will stop you. It won't end up getting you anywhere, but no one will stop you from not getting anywhere.
  9. Can you guess how james simon protect his strategy? so many people on st love to have a glimpse of what he does. I believe simons must have spent lots of effort protecting his strategy.

  10. logic man is very much correct in what he is posting.

    You see...A dealer has a book....It is his aggregation of trades. He knows if he is net long or net short and if he thinks the market is going a certain direction and his book does not agree...well this is where he can lets say "adjust" fills and get away with it if he is correct about where the market is going. The market will cover his off-quote-adjusted-fill pretty fast and there is no way to dispute this as there is not a regulated universal feed to look at timestamps with. Much of this is software controlled as just because you own a dealership does not make you a good trader...these guys hire traders to make more money for the firm than just the spread.

    So if a dealer has a client who is profitable most of the time and is a large enough trader maybe he might try to figure out what he is doing right and mirror this guys trades in his ENTIRE BOOK of trades.


    P.s. To the op...My earlier post addressed your question directly and I do not want to post off topic. I hope I helped.
    #10     May 14, 2011