If you know how those institutions are function, you know the answer. I talk too much today and I should keep my mouth shut down.
While it is possible that brokers or other players will see your successful trades, decipher your trading strategy, and then run your trading system until the edge disappears, it is not necessary to assume that this is what happens. Most of the time if you come up with an edge it's the sort of thing that other smart people could have discovered on their own -- and eventually they do. So most of the time what happens is that several other independent traders discover the same edge on their own and then trade it until it doesn't work anymore.
So, basically you've uncovered some big conspiracy of financial institutions to steal strategies from retail traders? If that's how they make their money, why hire high-priced traders when they could just hire people who could find profitable retail trading accounts and then steal the strategies from them? What you are saying makes no sense at all in light of what those institutions do day-to-day. Why do they put up the elaborate (and expensive) facade of developing their own strategies if all they need to do is steal them?
I feel like its more likely the brokers will to reverse enginneer the strategies of profitable quant firms rather than retail traders. Clearly the quant shops already have something worth stealing
I have a difficult time believing even that. How would a broker know if the particular trade wasn't part of a multi-part strategy executed through multiple brokers and if the entire multi-part strategy needed to be executed for the overall position to be profitable, e.g. a pairs trade or some elaborate correlation trade involving dozens of instruments, each of which played a different role within the strategy? Seems like only if the broker knew the entire context of the position would it make sense to reverse engineer anything. Also, brokers are in the business of broking, not stealing their customers' strategies. If a broker wants to be a trader, they would become a trading firm. Does intellectual property theft go on? Sure it does, but it's more likely that it occurs between competitors within the same segments of the market, i.e. one bank tries to steal the intellectual property of another bank, than between segments, i.e. a broker stealing a client's intellectual property. If it happened as frequently as you guys imply, then we would see more trading firms vertically integrating to own their brokers, wouldn't we? No one would ever trust a third party to act as their broker. Also, if this happened as frequently as the guy who made the initial comment I responded to suggests, wouldn't we have seen a lot of people caught and prosecuted for this? Surely not everyone who tries to do this is successful and gets away with it, right? Where are the guys who tried it and failed? There is just so much conspiracy-mongering on this site.
I break my strategy into 3 different brokers so that none of them can figure out what I am doing. A lot of novince traders only have one single account, mainly due to the limitations of capital. It is much harder and complicated to impeach any wrong doing in this industry, too many grey areas. Good luck and safe trading
Hello,.. the edge was there for the past 20 years and no one know about it, then suddenly "several more smart people" find the edge ?( only AFTER you find out the edge and use it with profitable for a short while, such a coincidence ??)
My quick answer to why 90% (or 75%, a high proportion!) lose. Costs are too high in proportion to the profit expected. Consider the crude oil market, CL. I see traders looking for 10-20 pips profit with say a 10 point stop loss. However, they are ignoring the the cost of trading. Commission at at IB is approx half a tick, with spread say 1 tick. So 1.5 ticks divided by 10 is 15%. Alarm bells should be ringing. Usually I look for at least 100 ticks profit, but I was guilty of looking for small amounts last week (the ranges was v small in the first few days). Not surprisingly I lost money intraday trading last week. Something similar is happening in the forex market as quoted in a post above.