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Do brokers have complete access to your trading system?

  • Post #1
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  • First Post: Edited Nov 25, 2012 1:07pm Nov 24, 2012 7:03pm | Edited Nov 25, 2012 1:07pm
Is this a silly question?
Quoting h4xforum
Is this a silly question?
Not really! I was trying to delete the default folder under Profiles; then, my mt4 gets a blank scream. The only thing they have to do is download the profiles (default) folder and they will have the system. Is there any ideas on how to protect your trading system from you broker?
Quoting h4xforum
Not really! I was trying to delete the default folder under Profiles; then, my mt4 gets a blank scream. The only thing they have to do is download the profiles (default) folder and they will have the system. Is there any ideas on how to protect your trading system from you broker?
I have my charts in a different computer and internet connection than my broker platform.

Brokers get your hard work for free when your strategy charts are with them. If you have a good system and is making money they will steal it from you and than kick you out because consistent winners don't interest to them.

And that different internet connection I mentioned above is in the name of my father in law ! Just in case!
So, you think you have rights? LOL
Wow.. this is a bit beyond paranoia.

Ok, a few things:

Brokers execute your trades. Forget charts and settings, they have your trade history in full. Save from splitting up execution between multiple brokers, they can figure out your strategy if they really wanted to do so.

However, why would they want to? Seriously, think about it, they have much easier tools at their disposal to generate revenue.

From a business point of view, I see no reason why a broker would want to take on market risk of trading strategies they have little grasp of outside of your trade history and what indicators that might be involved. If they were truly impressed with your performance they could just mirror your account, but even then they are taking on market risk with their operating capital when it could be better committed to expanding their business.

Plus, there's the matter of risk control.. which is out of the person copying a trade's hands.

That being said, I don't want to imply all brokers wouldn't do it. Evil and shady brokers might totally be willing to doing such things.. in the end some brokers might be totally into the gambling mindset and not care for common sense... there's no way to know for sure. That's why it's important to stick to very well regulated brokers and do your best to protect yourself from their bad business decisions.
FXGears.com
Quoting Jack_Larkin
Wow.. this is a bit beyond paranoia.

Ok, a few things:

Brokers execute your trades. Forget charts and settings, they have your trade history in full. Save from splitting up execution between multiple brokers, they can figure out your strategy if they really wanted to do so.

However, why would they want to? Seriously, think about it, they have much easier tools at their disposal to generate revenue.

From a business point of view, I see no reason why a broker would want to take on market risk of trading strategies they have little grasp...
No paranoia here bro, just being PRUDENT.

Now tell me who in this world wouldn't spy in a proven system?

If your charting is with your broker they can see everything you use, and how you use it. They can see you consistently draining money out of the market. Why not use the knowledge?

If something you discovered can add to their trading algos do you think they will not use it due to ethical reasons?
So, you think you have rights? LOL
Quoting ForexOracle
No paranoia here bro, just being PRUDENT.

Now tell me who in this world wouldn't spy in a proven system?

If your charting is with your broker they can see everything you use, and how you use it. They can see you consistently draining money out of the market. Why not use the knowledge?

If something you discovered can add to their trading algos do you think they will not use it due to ethical reasons?
It's just not part of a broker's core business. Processing trades is a near risk-less way they generate income, and it's very profitable, why would they commit capital to anything that has risk when it could be better served expanding their core business?

"Proven" is silly to think of any strategy. It's a game of probability and expectancy, which change over time as new trades are added to the sample you're deriving system stats from, nothing is set in stone and everything is fluidly changing... just like the market itself. The broker isn't you, and can't think like you, so they aren't adapting or trading like you... at best, they can mirror trade you (copying your trades) but again that goes back to the question of risk.

When did I ever say ethics has something to do with a broker using your work or not?

I think you need to re-read my post and do so slowly. When I say 'evil' and 'shady' brokers might be willing to do so, it's because they might be dodging regulatory standards that prevent such actions. Brokers that tend to gamble with operational and client funds often blow up.

Seriously speaking, even when the broker is actively taking on market risk to make a market for their traders, that process usually doesn't have a directional bias (in any trading strategy sense at least,) which is what most client traders are basing their systems on anyway.

Again, I'm not saying that all broker's don't trade themselves, and I'm not saying that all brokers wouldn't copy trade their good clients... I'm just pointing out that it doesn't make a lot of business sense for them to get caught up with such operations since the capital is better committed to less risky and more profitable core business functions.
FXGears.com
Quoting h4xforum
Not really! I was trying to delete the default folder under Profiles; then, my mt4 gets a blank scream. The only thing they have to do is download the profiles (default) folder and they will have the system.
If you are referring to MT4:

The Profiles > Default path contains .chr file types not .mq4, or .ex4 file types, which are used to execute your automated trades. The .ex4 calls the indicators used in your EA from the Experts > Indicators path not the Profiles > Default path.

If you should be concerned with anything, it is whether or not either the MT4 application Start-Up process, or the MT4 LiveUpdate process, at any point in time, uploads anything from inside your Experts folder as a Background Process. This can be checked with the right Network Security solution installed and properly configured on your own HDD.

If you don't know much about how IP networks work and you are concerned about back-door upload processes, then you should always use a good Network Monitor to capture the flow of traffic (uploads/downloads) to and through your machine. The largest EA I have on my HDD is over 1MB in size. I've had others that were larger. I can see that network traffic during MT4 start-up and MT4 update. I can also see whether or not the Experts directory is being accessed and which files are being touched.

Of course, I can also block anything from being uploaded anytime I desire.

So, the answer to the question is: Who knows. However, if you are using the Internet correctly, then the answer is: No.
Quoting Jack_Larkin
Seriously speaking, even when the broker is actively taking on market risk to make a market for their traders, that process usually doesn't have a directional bias (in any trading strategy sense at least,) which is what most client traders are basing their systems on anyway.

Again, I'm not saying that all broker's don't trade themselves, and I'm not saying that all brokers wouldn't copy trade their good clients... I'm just pointing out that it doesn't make a lot of business sense for them to get caught up with such operations since the capital...

Retail brokers are looking for every edge they can obtain and if it means taking positions against their customers (which Retails shops do all the time) then that's what they'll do. The question is not one of brokers "moving markets" directionally. The issue is typically brokers who manipulate their price feed and all of them do exactly that on a daily basis. In fact, that's simply the way their business model works. They have to fit their "commission" in the form of a "spread" into their pricing engine one way or another. This is how many of them make revenues.

The real question is whether or not your Retail broker is further "augmenting" or "manipulating" the bid/ask levels near your Stop and/or Limit levels, to yield and advantage to the House, by either triggering your Stop, or failing to trigger your Limit - at a specific time. That is a very legit question and you really have to run multiple data feeds as a Retail trader to get a well rounded understanding of what the "real retail price" is at any given moment. They all use proprietary liquidity pools and that means that while some are using the same liquidity providers, others are not. Therefore, the aggregate pricing that you ultimately see on your chart from one Retail broker, may not match the pricing seen on another broker's chart at the same time.

So, the real question is: who is manipulating the Bid/Ask the least in the Retail broker business? And, how frequently do you notice Bid/Ask widening or narrowing at or near your Stop and Limit levels?

Are they trading against you? Of course, many of them are doing exactly that.
Are they manipulating their price feed? Of course, as a matter of routine business practice - they have to make a buck.
Are they pushing and pulling the Bid/Ask near your Stop/Limit levels to give the House an edge? That's a very good/smart question to ask.
if I were a broker I believe I'd be delighted to have winning clients. I would basically front run their trades as its not illegal in spot fx. I would then hedge their trades with a counterparty and still get some profits from the spread.

I believe several brokerages do this.
wo-yoy! wo-yoy! wo-yoy! wo-yoi! wo-yoy-yoy-yoy!
Quoting pemully
if I were a broker I believe I'd be delighted to have winning clients. I would basically front run their trades as its not illegal in spot fx. I would then hedge their trades with a counterparty and still get some profits from the spread.

I believe several brokerages do this.
Just being a broker does have some very interesting (legal) privileges.
For the record, brokers have better things to do than to do a Spy Vs Spy routine..and for what its worth, it makes more sense for a broker to have more wins than figure out ways to access trading system and strategies.
Quoting GrowRevenue
Retail brokers are looking for every edge they can obtain and if it means taking positions against their customers (which Retails shops do all the time) then that's what they'll do. The question is not one of brokers "moving markets" directionally. The issue is typically brokers who manipulate their price feed and all of them do exactly that on a daily basis. In fact, that's simply the way their business model works. They have to fit their "commission" in the form of a "spread" into their pricing engine one way or another. This is how...
To be clear, the topic was brokers "figuring out your trading system", not trading against you. That's an entirely different conversation.



Quoting GrowRevenue
The real question is whether or not your Retail broker is further "augmenting" or "manipulating" the bid/ask levels near your Stop and/or Limit levels, to yield and advantage to the House, by either triggering your Stop, or failing to trigger your Limit - at a specific time. That is a very legit question and you really have to run multiple data feeds as a Retail trader to get a well rounded understanding of what the "real retail price" is at any given moment. They all use proprietary liquidity pools and that means that while some...
If a broker sends off-market quotes to your platform to triggers tops, (that is, not a glitch or bad tick that will later be corrected, but an actual attempt to hit orders by feeding in quotes that are off market) then that's activity that I'd say clear away from.

Most brokers simply don't do this on purpose.. once in a while a liquidity provider will feed bad ticks to a broker and it will affect their clients, but good brokers identify this and correct accounts.

As for bid/ask widening or narrowing near stop and limit orders: If you trade with a popular broker, with many thousands of traders all entering in orders and trading throughout the day, how do you think it makes sense for them to target your one order? How many other traders do you think will be affected by such actions?

And common, what makes more sense to you in terms of profit? A broker with a large amount of consistent traders doing volume, or a broker killing small accounts faster by pegging off orders? Cost of acquisition of a new client is huge, and brokers make tonnes of cash from volume (everything from being paid for taking liquidity, to capturing the spread, to commission charges, etc..) traded beyond that cost of acquisition.

However, if you are trading with a loosely regulated broker that doesn't have a lot of clients, and targets small account traders... then maybe they'd have incentive to do such shady things... big warning signs are brokers who offer big deposit bonuses (money comes from somewhere, it isn't free) or allow you to trade with just $10 and ultra high leverage (I've seen 2000:1, and that was a huge red flag.) Seriously, it's not hard to see the brokers who are setup to take advantage of traders failing.

If you're trading with brokers like this, then I understand why you think all brokers do such things to make money. Really, just stick to brokers who clearly model themselves to make money from transaction volume, have a good quote feed, well regulated, and aren't looking to scoop up minnows with $10 accounts.

I don't know what more to say about this.

Quoting GrowRevenue
Are they trading against you? Of course, many of them are doing exactly that.
Are they manipulating their price feed? Of course, as a matter of routine business practice - they have to make a buck.
Are they pushing and pulling the Bid/Ask near your Stop/Limit levels to give the House an edge? That's a very good/smart question to ask.
Trading against you? In most cases, a broker will net out their total client exposure within the brokerage (internalization.) This is where they match off traders with net long positions on a pair, with traders who have net short positions. This way they capture the spread, which is riskless, and one trader's order becomes the liquidity for another trader. Normally there is an imbalance in the number of traders long/short a pair, so the net difference is sent to the market to be covered.

Sometimes, brokers identify sure losers, traders who show losing patterns (such as holding onto losers, negative expectancy trading, no clear stop losses, revenge trading, etc..) and simply choose to take on the market risk of filling their trades directly. When the quote feed is clean and the trader would get the same price regardless of what the broker is doing, I see no problem with this... but again, this isn't as common as you think, given the leverage available to traders and a vetted broker's understanding that even bad traders have home run trades once in a while, the risk to a smart broker is minimal. (Some shady brokers, again as I pointed out above, set their clients up with plenty of rope to hang themselves like 2000:1 leverage on a $10 account, and probably take on market risk for everyone.. but why choose to trade there when they are so many better options?)

Manipulating the price feed? Shady brokers might try this, but most brokers don't do this since there are a lot of traders who would arb them to death if they did. Think about it, if a broker is even 1pip off market quotes, traders notice and take advantage of it, usually through arb EAs. I'm not talking about latency exploitation arb EAs, which are common and fruitless, but simple arbitrage or triangular arbitrage. Again, a shady or evil broker will do whatever they want since they'd just cancel winning trades of people taking advantage of their bad quotes, but a well regulated broker can't really get away with this. That's why knowing you can complain to a regulator, and get results, is important.. it's also why a well regulated broker probably won't be interested in doing such things.


Anyway, I feel like I'm just repeating myself all over this board... I understand why people are skeptical, and with so many failed, crooked, or shady brokers having screwed people over I totally get why people think the worst up front, but a lot of what people are afraid of just doesn't happen as often as they believe.

Key take aways:

  1. Stick to well regulated zones of the world, not only since the brokers regulated there might be less likely to cause problems, but because you have a 3rd party with power to complain to if things go bad.
  2. Stay away from brokers offering deposit bonuses or insane leverage. The number one killer of accounts is over-leveraging and little risk control, so brokers offering you tonnes of extra leverage and targeting newbs is clearly gunning for dead accounts.
  3. If your quotes are the same, market making isn't a bad thing... Forex is a made market after all, if it's not done on the broker level, the banks and liquidity providers are in the background. (I personally trade with a market maker and an ECN-like broker.. both are fine and don't screw me around at all.)

FXGears.com
Quoting ForexOracle
No paranoia here bro, just being PRUDENT.

Now tell me who in this world wouldn't spy in a proven system?

If your charting is with your broker they can see everything you use, and how you use it. They can see you consistently draining money out of the market. Why not use the knowledge?

If something you discovered can add to their trading algos do you think they will not use it due to ethical reasons?
Thanks, I agree.
Very Good question, actually i was about to ask it.
i think yes they can reverse engineering your trading system based on trades that you place, i do sometimes either if i find a good Returning PAMM accounts but its not that much simple.
but in my idea if your system is profitable and your broker finds how it works, so may they use it to make some extra money, and they wont share it with all around the world, so i mean there is a possible risk of reverse engineering from your broker but not all the world.
1- as a resolution to this assumption i was thinking about contacting them and make a good partnership with them, in this way you will work with the only peoples who have the possibility of finding your system, so you eliminates the risk that your system will be revealed with the world.
2- i was thinking about using my system with large amount of investing, i mean taking the result in the short period of time, so after, who cares that system will be revealed to all, you got your share.
3- i think splitting your system in several terminal will might help but that need lots of extra coding and may increase the overall risk of the system.
these are my ideas may i wrong
what about using vps ?
using VPS has several advantages like :
1- guaranteed connectivity to server
2- eliminates needs of a system to serve the client terminal
3- increase accessibility to the client terminal over internet
..........
but i don't think it will delete all your trading activity on the broker server, generally some people prior to my post mentioned it, i mean you cant delete your trading history anyway on the broker server, that's why i don't like PAMM accounts from some brokers, in theirs policy they place condition that all your trading activity "trading history" is revealed to everyone, that sucks.
  • Post #17
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  • Last Post: May 31, 2017 4:31am May 31, 2017 4:31am
STOP defending them you are getting commissions??? After fxcm made me lose and many others yes they do manipulate everything single peace of you MT4!!!!!!!!!!


Quoting Jack_Larkin
{quote} To be clear, the topic was brokers "figuring out your trading system", not trading against you. That's an entirely different conversation. {quote} If a broker sends off-market quotes to your platform to triggers tops, (that is, not a glitch or bad tick that will later be corrected, but an actual attempt to hit orders by feeding in quotes that are off market) then that's activity that I'd say clear away from. Most brokers simply don't do this on purpose.. once in a while a liquidity provider will feed bad ticks to a broker and it will affect...
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