Guys, just rethink what makes sense.
1) Normally on forex, your brokers should pass your order directly to the market. Even if they are initially your counterparty and might not be able to pass your order fast enough, there will be some orders they lose from and others where they will gain from. If they have a lot of liquidity providers, they should always be able to pass your orders immediately. There is a conflict of interest to not do this even if they are able to. This conflict of interests is everywhere in retail forex. To avoid this I suggest some simple things:
a) Only trade with a broker that you can trust. Who can you trust? This is very difficult to figure out. Maybe collect some experience. Read the business report. Is there a corporate responsibility report? How is the management? Where are they regulated? What does this regulation look for?
b) Try to print your signal (price and time) AND your true execution (price and time) in a logfile through the robot. If price and execution time differ from signal to true execution too much, there is only some explanations:
i) requote
ii) higher slippage
iii) price manipulation
Of course, the first two can also be manipulated. Confront your broker with this issue and force him to explain. Otherwise you will hand this on to regularoty agency and to your lawyer. To get your money back then, would be difficult. However this should give you some advantage if you are dealing with a scamming broker.
c) Avoid news trading.
And then there is other things that should be taken into consideration.
Once, I informed my broker about weird prices, they could not explain how this happened and wanted to have my account password. Of course I didnt just hand it to them. In the end it didnt matter, because it was on demo. However, I wonder why they need to log onto my account, if they can see all information without doing this. Yes there might be a chance, that the regulatory duties just forbid them to monitor my account activities and have to ask me for permission. And so they could pretend to follow their duties and still be able to have full access to account activities. I don't know what case is true. I should give you some idea of how this works.
Also interesting considering (cluster) risk, do you know how betting shops work? First the estimate the properbility of an outcome of an event B, like 10% (=1/10). Then they will offer you a price for the outcome of event B say 9($ or ). The expected value of this event 0.9 ($ or ) for each 1 $ or you spent. So on average you lose. However it does say nothing of the true outcome. The odds of B are 10% but can still happen. So if to many customers bet on B, the betting shops takes to much risk, regardless of the expected value, regardless of which outcome will occur. They just know, if B comes true (which will sometimes be the case), they will have to pay to many customers. What they do is:
a) They themselves bet on the same event on the same outcome at a different broker.
b) They decrease the prices for event B through time for every further customer betting on B if there are too many of them.
A broker does exactly the same. If there are too many orders at the same time, they won't promise to give each trader the best price, so they requote. However if requoting happens to often, you could either have a bad broker or a scamming broker. So it might be possible that by pure randomness that your algorithm sends orders always when many others do as well. You won't realise this on demo.
Next thing I want to mention is about market effiency. Imagine every trader in the world ( or almost everyone) trades the same signal. So they buy, when some signal occurs. Who will sell them for that signal? This simply means, if a robot or a system becomes too efficient or too profitable and everyone uses it, there will be no counterparty for that exact price. Not your broker, not a different trader. Not a liquidity provider. So you won't get that exact price but a worse one (requote). Also, why should someone sell a well working bot and not use it for himself?
Did you know that you can manipulate statistics? I do not speak of changing single numbers in the statistics. I mean: When selling a well working bot, every seller will only present the timeframe and timehorizon where it worked. They won't present you gaps in time, of course. This would be very suspecious. So they decide to present the statistical result of the same bot of either the years 2012-2013 (200% return) or 2015-2016 (50%), whichever gives the best results. They won't show you both. You see either 2012-2013 OR 2015-2016. Your brain wants to fill the rest (2014-2016 in the first case). You expect your return to be something like 200% as you saw in the presention ( because 2015-2016 wasn't presented). You might think "even if the true outcome is only 150%, it is still profitable". However, the bot gave a return of -1000% in 2014. Would you still buy it, if you knew this before?
In this last case, it is not even your broker's fault but rather your own incapability of judging statistics.
Another thing is that we have this elitist view on people of the financial industry. Would you really think such a person would say something like "Yes it is true, there are people that can program robots that are cleverer than me /us."?
1) Normally on forex, your brokers should pass your order directly to the market. Even if they are initially your counterparty and might not be able to pass your order fast enough, there will be some orders they lose from and others where they will gain from. If they have a lot of liquidity providers, they should always be able to pass your orders immediately. There is a conflict of interest to not do this even if they are able to. This conflict of interests is everywhere in retail forex. To avoid this I suggest some simple things:
a) Only trade with a broker that you can trust. Who can you trust? This is very difficult to figure out. Maybe collect some experience. Read the business report. Is there a corporate responsibility report? How is the management? Where are they regulated? What does this regulation look for?
b) Try to print your signal (price and time) AND your true execution (price and time) in a logfile through the robot. If price and execution time differ from signal to true execution too much, there is only some explanations:
i) requote
ii) higher slippage
iii) price manipulation
Of course, the first two can also be manipulated. Confront your broker with this issue and force him to explain. Otherwise you will hand this on to regularoty agency and to your lawyer. To get your money back then, would be difficult. However this should give you some advantage if you are dealing with a scamming broker.
c) Avoid news trading.
And then there is other things that should be taken into consideration.
Once, I informed my broker about weird prices, they could not explain how this happened and wanted to have my account password. Of course I didnt just hand it to them. In the end it didnt matter, because it was on demo. However, I wonder why they need to log onto my account, if they can see all information without doing this. Yes there might be a chance, that the regulatory duties just forbid them to monitor my account activities and have to ask me for permission. And so they could pretend to follow their duties and still be able to have full access to account activities. I don't know what case is true. I should give you some idea of how this works.
Also interesting considering (cluster) risk, do you know how betting shops work? First the estimate the properbility of an outcome of an event B, like 10% (=1/10). Then they will offer you a price for the outcome of event B say 9($ or ). The expected value of this event 0.9 ($ or ) for each 1 $ or you spent. So on average you lose. However it does say nothing of the true outcome. The odds of B are 10% but can still happen. So if to many customers bet on B, the betting shops takes to much risk, regardless of the expected value, regardless of which outcome will occur. They just know, if B comes true (which will sometimes be the case), they will have to pay to many customers. What they do is:
a) They themselves bet on the same event on the same outcome at a different broker.
b) They decrease the prices for event B through time for every further customer betting on B if there are too many of them.
A broker does exactly the same. If there are too many orders at the same time, they won't promise to give each trader the best price, so they requote. However if requoting happens to often, you could either have a bad broker or a scamming broker. So it might be possible that by pure randomness that your algorithm sends orders always when many others do as well. You won't realise this on demo.
Next thing I want to mention is about market effiency. Imagine every trader in the world ( or almost everyone) trades the same signal. So they buy, when some signal occurs. Who will sell them for that signal? This simply means, if a robot or a system becomes too efficient or too profitable and everyone uses it, there will be no counterparty for that exact price. Not your broker, not a different trader. Not a liquidity provider. So you won't get that exact price but a worse one (requote). Also, why should someone sell a well working bot and not use it for himself?
Did you know that you can manipulate statistics? I do not speak of changing single numbers in the statistics. I mean: When selling a well working bot, every seller will only present the timeframe and timehorizon where it worked. They won't present you gaps in time, of course. This would be very suspecious. So they decide to present the statistical result of the same bot of either the years 2012-2013 (200% return) or 2015-2016 (50%), whichever gives the best results. They won't show you both. You see either 2012-2013 OR 2015-2016. Your brain wants to fill the rest (2014-2016 in the first case). You expect your return to be something like 200% as you saw in the presention ( because 2015-2016 wasn't presented). You might think "even if the true outcome is only 150%, it is still profitable". However, the bot gave a return of -1000% in 2014. Would you still buy it, if you knew this before?
In this last case, it is not even your broker's fault but rather your own incapability of judging statistics.
Another thing is that we have this elitist view on people of the financial industry. Would you really think such a person would say something like "Yes it is true, there are people that can program robots that are cleverer than me /us."?
May the Pip be with you.
