Do many prop firms try to piggy-back on their best traders' positions? Is this common practice in the industry?
yep. i can't tell you how bad it is. if you're a scalper, wow. there is some simple automation out there that would scare you...IF it hasn't already started to mess with your pnl.
how to tell... well, if you've never been an amazing trader, and then all of a sudden you have some solid months, then 'something' happens. thats probably the first sign. now if you're not scalping, well this just matters less and less and then you don't really have an excuse for why things go sour. but yeah, scalpers, you can play the llc stealing my strategy card any day.
and no, not all llcs have the technology to just match all your pendings order for order, but they all will, very, very soon at a low cost. (this isn't some voodoo prediction theres not just an actual reason for this, but an actual product/tool that will be available) but if you knew how many llcs just sat and 'managed your risk' you'd be shocked. and if you're sitting here and saying, "what a bunch of @#$!#$, thats so shady" well you're either a complete noob or you're just not being honest with yourself because most traders i know that are profitable would do the same thing...i mean if you gave me the riskware to 300 traders who at anytime could blow up my llc, you're damn skippy i'm gonna at least watch who's making the most. i mean nothings for free. if i'm gonna let you have trades at cost on a 3k deposit with a million bp, well, yeah, and you think i'm just gonna give you the potential to blow up my llc at any moment when your 20k scalp in pfe which you only planned on losing a nickel gets halted on news without getting something for it (your strategy) you're insane.
the only people who should be concerned are the shortest time frame equity scalpers. thats basically it. most llcs i know just don't have the capital (under 10 mill...i mean really how many sub's have this much in deposits + money under their beds) to actually want to invest that capital in mimicking what is essential a couple longer term strategies....why waste money on that when you can just milk every penny you have employing a far less risky strategy not even front running traders orders, just mimicking them till a strategy becomes unprofitable. its just in our nature to do things like this, use up stuff/lay waste to things which in this case would be making a strategy unprofitable, sucking it up for all its worth.
also, people have been laying out a retarded doomsday prediction for scalpers year after year after year. and the thing is, they would all be true for a particular brand of scalper, the ones that make money off stupid inefficiency. hitting economic numbers, only looking for price improvements, i mean if it seems like a monkey could do it, whatever mechanism of the market you're exploiting will no longer exist (bots hitting econ numbers, hybrid for price improvement monkeys), OR someone/something (llc/bot firm/automation) will come along and do things you can't do. does that mean "its the end for scalpers" no not at all. but this particular brand of scalper, the kind that has an explainable strategy based on inefficiency...well, you ain't dead, but lets just put it this way, nobody is buying breakouts in the futures market for a tick with a tick stop out....nobody is trying to watch that 1000 lot decrement and time that entry....can you still do that in stocks...sure....are you days numbered? i dunno, because thats not something so gay a monkey could do it (its not obviously profitable) but if you do something that seems as much of a gmmick as past gimmicks...well, its not that you should be concerned, its that you probably are because its happening already.
I think it's an interesting problem to be able to cloak your trades. I'm a newb to all of this but I can imagine a few ways. How about periodically making really bad trades and offseting the position by trading options in a retail account. You'd have to be very careful and would incur slippage. However, a few doosies and they'll probably lump you safely in the "bad trader" group that they don't shadow. I guess they could filter on timeframe if you're a scalper though. Are there rules about this with registered firms?
well a few places have offered a non disclosure agreement. the thing is, your average discretionary scalper, profitable or not, doesn't know the legality behind one of these, let alone how to know if something is fishy (you can lump me in that category as well. despite my knowledge of these activities, i could sign 20 ndas and you could get in front or behind all my orders, without me even knowing. as regards the multiple account thing, sure, thats possible for something longer term, and for the dreamer who scalps, "sure, its possible, i'll just hypoblah blah blah balhb la blah lbah talk talk talk talk talk" and guess what, never ever, execute on that idea. its typical of creative ideas. smart people actual make stuff. pot heads and homeless people on venice, yeah, they got a lot of time to "think". i'm not a homeless pothead, i'm just not smart enough to execute on any hypothetical ideas in regards to protecting one's ultra short term equity scalping. i could sign an nda, and you could basically pull the rug from under me. as to whether this is an 'occupational hazard' well its like anything else in trading. its only a problem if you're in this select group of individuals and do nothing to adapt. Its clear as day to anyone before this technology even started to roll out that a certain subset of 'scalping' can't last because its just too retarded to keep on forever. its like most inefficiency...you just keep asking yourself, "wtf how could this last this is so stupid'. the thing is, when its staring you in the face, when you know shit is broke, you don't need conspiracy theories or xyz, you just gotta adapt, or be phased out like every other scalper in the past who looked the other way. adapting in trading usually means tailoring/changing your style. well in this case, it could be that, or you can just start sleeping with the enemy because i'll tell you what, i'm not gonna learn to program better than most, and i'm not gonna start trading a timeframe i have no idea of how to make a LIVING (being 'profitabe' on 200 shares a position and 'learning' isn't a living", trading a substantially longer time frame.