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Re: Mirrored and Notional Account magic



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Walt,

I don't agree with you about your mirrored account theory for the
following reasons.

You cannot assign winning trades to one account and losing trades to
another account unless you, the broker and the brokerage house are willing
to risk suspension, banishment and zillions in fines.
To protect against what you are talking about, I remind you that the rule
is in place now.

Account numbers have to be supplied at the time of order placement.

If anyone can tell ahead of time which account will be the winner and
which will be the loser, they don't need to have a mirrored account.

 Not knowing in advance which account will be the good one, the end result
will be 2 accounts with trades. Combining these 2 account will equal no
change (minus commissions and slippage) but will not result in building
any kind of a track record which is what you suggest the purpose of this
is.

Regards,

Manning Stoller

Walt Downs wrote:

> As an item for those interested in how realtime trading results are
> sometimes generated by system vendors and even CTA's for purposes of
> disclosure documentation:
>
> If total volume on a portfolio is, say, 5.0 and the profitable account
> verification is 2.5, this often means the account was "mirrored".
> In other words, *two* accounts were opened by the trader, and for
> each trade taken in one account, an opposite and off-setting trade
> was taken in the other. Thus the trader is able to build a "realtime"
> trading record, while only suffering the costs of slippage and
> commissions. This isn't necessarily bad, as long as the "test account"
> is clearly designated. Else the trader would be free to choose only
> the profitable side. <g> I don't think this happened in LW's case, as
> I doubt the contest organizers would have accepted the mirror.
>
> "Notional" accounts run a small equity balance against a verified
> "outside" source of capital. Let's say you have 100 K in trading
> capital. You place 10 K in a trading account, and 90 K in the
> bank. The Clearing house then allows you to trade the 10 K
> account against the total available equity of 100 K. So, if your
> drawdowns should surpass the 10 K mark, your account is still allowed
> to trade. Yet, all profit ROA percentages are figured against 10 K.
> If the drawdowns are small enough to fit the 10 K account, the CTA
> claims the bloated ROA percentages. If the drawdowns exceed 10 K,
> he claims the ROA percentages against the 100 K total available
> equity. Sneaky, but it has been done.
>
> These are examples in which even "realtime" results may be
> manufactured or massaged. <g> Apologies for the digression
> from the normal guidelines of list topics.
>
> Walt Downs
> CIS Trading