Keith, front running would assume they weren't
offering you DMA (direct market access) - my broker does... and that they
therefore knew what your trades were before you did...
I prefer the idea of me front running them...
I know a guy who hasn't lost money day trading in nearly 2 years now... he made
just over $1m USD last year... if his broker is eroding his edge by front
running, he hasn't seen it... and trading is his life... he'd notice.
--- In amibroker@xxxxxxxxxxxxxxx,
Keith McCombs <kmccombs@xxx> wrote:
>
> "(by entering trades in the same direction after you)"
> Why wait until 'after'. The only thing that prevents them from "front
> running" are government regulations, which are enforced, without
exception*.
>
> *note: sarcasm intentional
>
> sidhartha70 wrote:
> >
> >
> > I have to say that I find this idea that brokers will work out your
> > strategy slightly fanciful.
> >
> > I agree & accept that if you are a consistent winner that
brokerages
> > might try to shadow your trades... that's great as far as I'm
> > concerned because they simply add to your own alpha (by entering
> > trades in the same direction after you) not erode it.
> >
> > However, the idea that brokers are smart enough to even begin to
> > untangle a complex profitable strategy simply by looking at the
trades
> > is pure imagination in my opinion.
> >
> > Again, I talk as a trader who trades a defined system on a
> > discretionary basis... including contingency plans for all my trades,
> > chase plans for late entries... I often reverse a position if I'm
> > wrong etc...etc...
> >
> > I would wager a bunch of smart people could look at my trades for a
> > very long period of time and make little sense of them ...
> >
> > --- In amibroker@xxxxxxxxxxxxxxx
<mailto:amibroker%40yahoogroups.com>,
> > "huanyanlu" <huanyan2000@> wrote:
> > >
> > > Yiki, tashikani soodesu. You have made a valid point, as the
profit
> > have to be made somewhere and those accounts would be subject to
scrutiny.
> > >
> > > Huanyan
> > >
> > > --- In amibroker@xxxxxxxxxxxxxxx
> > <mailto:amibroker%40yahoogroups.com>, Yuki Taga
<yukitaga@> wrote:
> > > >
> > > > Huanyan,
> > > >
> > > > Splitting the trading probably won't help you. If you could
identify
> > > > the weakest trades (the ones you would, perhaps, direct to
brokerage
> > > > B), you would eliminate them completely. So the results
over time of
> > > > split trades should approximate your overall results. And
of course
> > > > if you shunt only the bad trades to broker B, then the
results at
> > > > broker A are going to be even more spectacular. Brokerage A
is then
> > > > going to have even more incentive to examine your play.
> > > >
> > > > There would seem to be no way to disguise your play,
because you are
> > > > not a market specialist. ^_^
> > > >
> > > > Remember, it's not the amount you win (splitting would
affect this
> > > > number, but it's meaningless), but the consistency and the
> > > > methodology and the risk metrics, that will draw attention.
> > > >
> > > > One way to disguise the system itself would be to
occasionally throw
> > > > in the deliberate "anti-system" trade -- a
throwaway trade made on an
> > > > absolutely contrary-to-the-system basis. That might throw
off a
> > > > search for your system. (Perversely, it might also win.)
^_^ But
> > > > unless you did it often enough to influence your real
returns (which
> > > > you would not do, because then your returns would be
negatively
> > > > affected), then it would have no value in terms of stopping
someone
> > > > from shadowing you.
> > > >
> > > > I've never worried about brokers taking the other side of
my trades.
> > > > I'd end up owning the companies if they did that long
enough. ^_^
> > > > But just as I assume that they look at good traders, I
would assume
> > > > that they look at clueless traders (although clueless
traders tend to
> > > > run out of money, so they would be limited to looking at
clueless
> > > > traders that seem to have a wellspring of money somewhere
to
> > > > replenish their accounts). I wouldn't mind taking the other
side of
> > > > any trade made by someone with a demonstrated capacity for
being
> > > > wrong.
> > > >
> > > > But I think the practices are almost impossible to stop.
Brokers are
> > > > often members of exchanges (if not always), and they
routinely
> > > > generate data for the exchanges (margin long outstanding
and margin
> > > > short, for example). So they have at least some valid
reasons for
> > > > analyzing data.
> > > >
> > > > And as I say, human beings, generally, are not going to
pass up any
> > > > profit opportunities. If you are trading at *MY* firm, and
you are
> > > > consistently making a pile of money, with risk metrics that
I find
> > > > acceptable, I'm going to have a look at your action. A very
close
> > > > look. Think of me as the camera behind the overhead mirror
at
> > > > Caesar's Palace. ^_^
> > > >
> > > > Yuki
> > > >
> > > > Saturday, June 6, 2009, 12:26:07 PM, you wrote:
> > > >
> > > > h> Interesting idea, Yuki.
> > > >
> > > > h> Can someone verify if it is a common practice for
brokers to
> > > > h> investigate the performance of its clients ( of
courese internally
> > > > h> and act in low profile ) and then try to figure out
the
> > > > h> methodology of the successful clients ?
> > > >
> > > > h> If it is the truth, then is it advisable to split the
trading
> > > > h> operation among accounts in different brokers ?
> > > >
> > > >
> > > > h> Huanyan
> > > >
> > > >
> > > >
> > > > h> --- In amibroker@xxxxxxxxxxxxxxx
> > <mailto:amibroker%40yahoogroups.com>, Yuki Taga
<yukitaga@> wrote:
> > > > >>
> > > > >> KM> Why would it be discovered?
> > > > >>
> > > > >> I would be inclined to believe that any system
that is employed for
> > > > >> any reasonably lengthy period of time will be
discovered. I think
> > > > >> this is particularly true now in the data processing
age. Human
> > > > >> beings are, after all, human beings. And behind
all the machines,
> > > > >> there are human beings. You can't trade without
exposing
> > yourself to
> > > > >> the machines (which "remember" all your
trades forever) and, very
> > > > >> importantly, to the people who have access to the
machines, or who
> > > > >> control the people with access.
> > > > >>
> > > > >> I don't know where this might be illegal or legal,
and I'm sure
> > it is
> > > > >> in some places and maybe isn't in others, but if I
was a ranking
> > > > >> officer in a brokerage firm, you can be absolutely
sure that I
> > would
> > > > >> know exactly who my most profitable clients were
over time --
> > using a
> > > > >> basket of metrics to look for outstanding
performance that fell
> > > > >> within allowable risk parameters. And you can also
be sure that I
> > > > >> would spend no small amount of time and effort
trying to ascertain
> > > > >> how any sustained profitability that was in the
bounds of my
> > metrics
> > > > >> was being generated. I'd be running the data
periodically. Need I
> > > > >> say more?
> > > > >>
> > > > >> If you are siphoning money out of the market on a
consistent basis,
> > > > >> and doing it better than almost anyone else (basis
simple RoR,
> > better
> > > > >> risk-adjusted numbers, some the combination of the
two, or whatever
> > > > >> measures you happen to be looking for), it is
going to be noticed.
> > > > >> There is almost no way to get around this. Your
identity can be
> > > > >> cloaked without too much trouble, but cloaking
your play is
> > much more
> > > > >> difficult -- because you have to play.
Conceivably, you could break
> > > > >> your play up among several sets of machines, but
if you are
> > > > >> successful enough I think your play is going to be
detected.
> > > > >>
> > > > >> If you are small potatoes, you have less of a
problem I'm sure.
> > > > >> Almost no problem. But if you have a system good
enough to interest
> > > > >> someone else, you aren't going to remain small
potatoes very long.
> > > > >> And in the meantime, you are going to be putting
up some trade
> > > > >> statistics that should attract someone's
attention. Let me change
> > > > >> that to *will* attract someone's attention.
> > > > >>
> > > > >> It's called the smell of money. And one of
humanity's most powerful
> > > > >> olfactory capabilities is detecting that odor.
> > > > >>
> > > > >> Yuki
> > > > >>
> > > > >> Saturday, June 6, 2009, 10:32:32 AM, you wrote:
> > > > >>
> > > > >> KM> The statement, "they will be
discovered and traded",
> > contains two
> > > > >> KM> assumptions, which I find difficult to
accept.
> > > > >>
> > > > >> KM> First, addressed by Brian below, it will be
discovered only
> > if it is
> > > > >> KM> used to an extreme extent. The system may,
for example,
> > just trade
> > > > >> KM> relatively small lots in large and
universally held
> > equities. One could
> > > > >> KM> possibly make millions from futures and
forex without
> > effecting the
> > > > >> KM> markets one iota. Why would it be
discovered?
> > > > >>
> > > > >> KM> Second, even if it were discovered and even
became widely
> > publicized, it
> > > > >> KM> still might not be traded sufficiently by
others to have
> > any effect on
> > > > >> KM> its success. The system might, for example,
require
> > considerable
> > > > >> KM> patience by the trader, so much so that
only a very small
> > number of
> > > > >> KM> traders would be willing to use it. Or it
could be based on
> > some theory
> > > > >> KM> that all but a few would reject, despite
its effectiveness.
> > > > >>
> > > > >> KM> It's believed by many, including yours
truly, the the most
> > effective,
> > > > >> KM> low risk/reward, way to make money from the
stock markets,
> > is to write
> > > > >> KM> books and give lectures about how to make
money in the
> > stock market.
> > > > >> KM> This system has been going on for years, is
well known, and
> > so far
> > > > >> KM> appears to be quite profitable. I doubt
that it will ever
> > stop working.
> > > > >>
> > > > >> KM> -- Keith
> > > > >>
> > > > >>
> > > > >> KM> brian_z111 wrote:
> > > > >> >>
> > > > >> >>
> > > > >> >> <snip> I find the statement that
all trading systems stop
> > working
> > > > >> >> eventually to be too vague.<snip>
> > > > >> >>
> > > > >> >> Howard has provided supportive arguments,
to this theory, at
> > various
> > > > >> >> times, and we can not accuse Howard of
being vague or
> > equivocating
> > > > >> >> when it comes to trading (I thank him for
that).
> > > > >> >>
> > > > >> >> As I recall the basis of his view is:
> > > > >> >>
> > > > >> >> - all systems will fail eventually
> > > > >> >> - they will be discovered and traded
> > > > >> >> - trading the edge erodes the edge
> > > > >> >>
> > > > >> >> By 'erodes the edge' Howard means that
if, for example, I am
> > trading a
> > > > >> >> system and buy, at the entry signal of
100.00,, and sell on
> > the exit
> > > > >> >> signal of 103.00, I have made a profit of
3%.
> > > > >> >>
> > > > >> >> If a lot of people start trading the same
system (same market/
> > > > >> >> timeframe etc) then the second person in
will have to buy
> > at, say
> > > > >> >> 100.01 and sell at 102.99 (because my
action in
> > buying/selling before
> > > > >> >> them moved the bid/ask (theoretically
trader 2 ends up with
> > a profit
> > > > >> >> of 2.98% , calculated on a commission
free basis and so on,
> > down the
> > > > >> >> food chain).
> > > > >> >>
> > > > >> >> According to this theory, the efficiency
of the trade has been
> > > > >> >> diminished i.e. what was a 3% trade has
been reduced to a
> > <3% trade(on
> > > > >> >> average) due to other traders piling in
to the trade.
> > > > >> >>
> > > > >> >> My critique of that argument is:
> > > > >> >>
> > > > >> >> - the reason why any trade (tick) is made
(appears on the
> > tape) is
> > > > >> >> unknown to us (except for our own trade)
> > > > >> >> - all ticks, other than those that are
trading our system,
> > are noise
> > > > >> >> (to us) and therefore random
> > > > >> >> - ticks associated with our trade, that
are not placed by
> > us, will be
> > > > >> >> dispersed in time, (due to the various
trading time delays
> > experienced
> > > > >> >> by individual traders).... so they will
be interposed by
> > random ticks
> > > > >> >> - in a pure market (no commissions and no
manipulation of
> > the trades
> > > > >> >> by insiders) there is a 50/50 chance that
my tick (if I take
> > the
> > > > >> >> market price) will be less than the
midprice of the bid/ask
> > when the
> > > > >> >> signal was generated at the exchange.
> > > > >> >> - my price could move away from the
original midprice
> > substantially,
> > > > >> >> in a fast market, but no one can know the
reason for the
> > fast trading
> > > > >> >> or attribute it to our system (my system
only produces a buy
> > signal
> > > > >> >> once every 2-3 days on average - fast
markets happen all of
> > the time,
> > > > >> >> when I am not trading my system, and
presumably slippage is
> > still
> > > > >> >> occurring, in other transactions, so the
evidence is against
> > the fact
> > > > >> >> that my system is the cause of slippage
and fast markets).
> > > > >> >>
> > > > >> >> The exception to that is if a 'player'
with a big account,
> > relative to
> > > > >> >> the liquidity of the instrument, is also
playing the same
> > system, at
> > > > >> >> the same time, in the same
market/instrument/timeframe.
> > > > >> >>
> > > > >> >> So the question is:
> > > > >> >>
> > > > >> >> - to what extent are 'big players'
trading a system, in a
> > highly
> > > > >> >> liquid instrument, with enough clout to
move the market?
> > > > >> >>
> > > > >> >> - IF big players are system trading what
type of system
> > would they be
> > > > >> >> likely to play and what% of the total
funds they are
> > controlling are
> > > > >> >> they likely to risk on any single system?
> > > > >> >>
> > > > >> >> - are they likely to play with large
enough sums of money to
> > erode the
> > > > >> >> efficiency of the system they are
trading?
> > > > >> >>
> > > > >> >> - IF they are playing a system, with
large amounts of money,
> > is it
> > > > >> >> likely that their system would involve
entering all of that
> > money at
> > > > >> >> the same time i.e. they would trade in
such a way that they
> > would make
> > > > >> >> an intraday splash OR are they more
likely to trade
> > systematically
> > > > >> >> over longer timeframes (that might be a
reason that intraday
> > sytems
> > > > >> >> don't get eroded as often as EOD systems
.... if that claim,
> > made by
> > > > >> >> some, is true).
> > > > >> >> - IF big players do trade in such a way
that they are
> > 'moving the
> > > > >> >> market' do you think they would be so
naive that they are
> > unaware of
> > > > >> >> this and haven't factored that in to
their strategy..... if
> > 'moving
> > > > >> >> the market' is negative to their strategy
would they do that
> > ...if
> > > > >> >> 'moving the market' is positive to their
strategy are they
> > more likely
> > > > >> >> to implement that strategy in illiquid
instruments/small
> > timeframes OR
> > > > >> >> the reverse?
> > > > >> >>
> > > > >> >> But all of that is just a nice theory.
> > > > >> >>
> > > > >> >> The best argument against any theory is
evidence.
> > > > >> >>
> > > > >> >> Some forum members have listed some
example trading systems
> > that have
> > > > >> >> been published for decades AND they are
still going strong
> > AND their
> > > > >> >> performance has not 'faded in and out'.
> > > > >> >>
> > > > >> >> Anyone who wants to defend the 'trading
the edge erodes the
> > edge'
> > > > >> >> argument now needs to prove that these
systems were never
> > published
> > > > >> >> AND that after they were published they
ceased to work.
> > > > >> >>
> > > > >> >> That won't be an easy task because
Samantha's unequivocal
> > example (a
> > > > >> >> 10 bar SMA on monthly data) is based on a
trading idea (MA
> > crossovers)
> > > > >> >> that has been around forever (Tomasz even
ships AB with a
> > example code
> > > > >> >> in his formula folder and the manual) and
there are
> > published studies
> > > > >> >> on the net (rigorous studies at that)
that are relatively
> > current.
> > > > >> >>
> > > > >> >> However, the more imporanat question
seems to be, if these
> > systems did
> > > > >> >> not fail, due to being published and/or
traded, why didn't they?
> > > > >> >>
> > > > >> >>
> > > > >> >> --- In amibroker@xxxxxxxxxxxxxxx
> > <mailto:amibroker%40yahoogroups.com>
> > <mailto:amibroker%40yahoogroups.com>,
> > > > >> >> "Leading Edge Systems"
<rdcpa@> wrote:
> > > > >> >> >
> > > > >> >> > I am new to Amibroker and I have
been using Howard's which
> > I find to
> > > > >> >> be excellent, as a guide to learing AB.
> > > > >> >> >
> > > > >> >> > I find the statement that all
trading systems stop working
> > > > >> >> eventually to be too vague. First
"stop working" is a
> > relative term
> > > > >> >> and would have a different meaning for
each of us. Also I think
> > > > >> >> inefficiencies can come and go in cycles
based on the
> > popularity of a
> > > > >> >> particular type of trading. Once an
inefficiency has been
> > traded away
> > > > >> >> due to over-popularity, it probably will
go out of fashion
> > and then
> > > > >> >> become an inefficiency again some time in
the future. All
> > this depends
> > > > >> >> on the specifics of what we mean by
"stop working" and "a
> > system".
> > > > >> >> >
> > > > >> >> > Rich
> > > > >> >> >
> > > > >> >> >
> > > > >> >> >
> > > > >> >> > --- In amibroker@xxxxxxxxxxxxxxx
> > <mailto:amibroker%40yahoogroups.com>
> > > > >> >> <mailto:amibroker%40yahoogroups.com>,
"samu_trading"
> > <samu_trading@>
> > > > >> >> wrote:
> > > > >> >> > >
> > > > >> >> > > All,
> > > > >> >> > >
> > > > >> >> > > In his really good book
Quantitative Trading Systems,
> > Howard
> > > > >> >> states that all trading systems will stop
working forever at
> > some
> > > > >> >> point (because the inefficiency in the
market they exploit
> > will be
> > > > >> >> killed by everybody jumping on board).
> > > > >> >> > >
> > > > >> >> > > On the other hand you have
momentum / ROC based systems
> > working
> > > > >> >> forever now, same for trend following MA
crossover systems
> > like The
> > > > >> >> one propagated by Mebane Faber. Momentum
and MA rossover
> > > > >> >> trendfollowing does seem to work
"forever".
> > > > >> >> > >
> > > > >> >> > > Any comments from the gurus
here?
> > > > >> >> > >
> > > > >> >> > > Thanks, Samantha
> > > > >> >> > >
> > > > >> >> >
> > > > >> >>
> > > > >> >>
> > > > >>
> > > >
> > >
> >
> >
>