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Profiting from Broker Quotes

  • #21
  • May 7, 2007 10:46am May 7, 2007 10:46am
I'm going to guess that's a demo account.
  • #22
  • May 7, 2007 11:42am May 7, 2007 11:42am
Broug,

This is NOT a demo account.

This is a live account.

Tom
  • #23
  • May 7, 2007 4:00pm May 7, 2007 4:00pm
I am moving to a non MT4 broker that warned me to not do this. Apparently the inside community is tighter knit than we think. they claim to be able to track you down if you are doing it. Maybe by IP address or something? Not exactly sure how.
Is this considered arbitrage of some sort?
  • #24
  • May 8, 2007 4:04am May 8, 2007 4:04am
Quoting cheezehead
I am moving to a non MT4 broker that warned me to not do this. Apparently the inside community is tighter knit than we think. they claim to be able to track you down if you are doing it. Maybe by IP address or something? Not exactly sure how.
Is this considered arbitrage of some sort?
Which begs the question, why did they tell you not to?
If it's too good to be true, it probably is.
  • #25
  • May 8, 2007 7:32am May 8, 2007 7:32am
  •  iya
  • | Joined Oct 2006 | Status: always protect yourself | 129 Posts
Quoting SimonK
Which begs the question, why did they tell you not to?
And also: why would anybody choose such a broker? That's like telling a poker player to not play any strong hands. My definition of trading is arbitraging – everything else is either investing or simply getting ripped off. Arbitrage, like the strategies from this thread, provides exactly the market pressure that keeps an unregulated market working efficiently. And it works better (or at least as well as) any centralized exchange ever could.

Sorry if this sounds like ranting. There are also some fundamental problems that many traditional brokers have to stop their customers from exploiting; usually resulting from promises that simply can't be kept: like fixed spread, guaranteed stops, continuous price, etc.
  • #26
  • May 8, 2007 8:19am May 8, 2007 8:19am
Quoting iya
And also: why would anybody choose such a broker? That's like telling a poker player to not play any strong hands. My definition of trading is arbitraging – everything else is either investing or simply getting ripped off. Arbitrage, like the strategies from this thread, provides exactly the market pressure that keeps an unregulated market working efficiently. And it works better (or at least as well as) any centralized exchange ever could.

Sorry if this sounds like ranting. There are also some fundamental problems that many traditional brokers have to stop their customers from exploiting; usually resulting from promises that simply can't be kept: like fixed spread, guaranteed stops, continuous price, etc.
the market needs ppl to take advantage of any arb opportunity that arises. This helps keep the market inline and accurately priced
  • #27
  • May 8, 2007 8:52am May 8, 2007 8:52am
Forgetting actual arbitrage for a second...let's presume my broker quotes 1.9950 for the GBP and I KNOW the price is actually 1.9900.

My question is: Is it legal/fair to sell x amount short at 1.9950 knowing that my broker will be forced to correct the price, making me a huge profit?

I would like people's opinion on this. I actually do this regularly and I suppose it is unfair because I am profiting from anothers mistake but even putting fairness aside, is it legal?

Again, in my experience, I would argue it is. The reason for this is because I have done it so many times and made significant amounts of money doing it that if it wasn't legal then I am sure the company would be quick to tell me that they would not pay out/honour my bet. This has never happened however.

Still, I am interested to hear what others think.
  • #28
  • May 8, 2007 9:09am May 8, 2007 9:09am
Quoting the_wizard
Forgetting actual arbitrage for a second...let's presume my broker quotes 1.9950 for the GBP and I KNOW the price is actually 1.9900.

My question is: Is it legal/fair to sell x amount short at 1.9950 knowing that my broker will be forced to correct the price, making me a huge profit?

I would like people's opinion on this. I actually do this regularly and I suppose it is unfair because I am profiting from anothers mistake but even putting fairness aside, is it legal?

Again, in my experience, I would argue it is. The reason for this is because I have done it so many times and made significant amounts of money doing it that if it wasn't legal then I am sure the company would be quick to tell me that they would not pay out/honour my bet. This has never happened however.

Still, I am interested to hear what others think.
I think it is fair Wizard. Imagine if the broker had gained by quoting a wrong price. Do you think they would be offering everyone refunds?

And lets not forget that brokers regularly spike the price up/down during off-market hours in order to hit people's stops. I dont see why we shouldnt take advantage of brokers under those circumstances.
If it's too good to be true, it probably is.
  • #29
  • May 8, 2007 9:13am May 8, 2007 9:13am
I think that once they present the quote they are making an offer and when you click buy or sell you are essentially accepting the offer, thus making a legally binding contract. Of course I'm not a lawyer though.
  • #30
  • May 8, 2007 9:37am May 8, 2007 9:37am
Quoting jeffreytp
I was observing the GBP/USD on two broker MT4 platforms during the NFP this morning. 1st broker has fixed spread = 3pips, 2nd broker widens spread = 12+. During normal market conditions, they are within 1pip of each other, and the 2nd broker has a spread of 4-5 pips. This morning ,after the release, I noticed a huge gap between the two brokers. For instance:

At the same exact time/second:

1st broker: 1.9912/1.9915
2nd broker: 1.9871/1.9883

The 1st broker increased their pricing before the 2nd broker. What I would have liked to do was, at that instance, simultaneously, Buy at the 2nd broker at 1.9883 and sell at the 1st broker at 1.9912. When the market calms down and the spreads go back to normal, wheather it be 2 min or 2 hours, it doesn't matter, I would close both positions with both brokers simultaneously. I have noticed these quote discrepancies on numerous occassions. The end result would have been +31 pips.

Here's what I need, and can anyone program it?:

I need a program that will observe the pricing on both platforms and when the difference between the lowst ask price of both brokers and the highest bid price is greater than 15 pips (you can make this what ever you want), place those orders.

Here's the catch. In order for this to work and not screw us, the orders need to be filled instantly at those prices. I was thinking a limit order would work better, versus a market order.

What are your thoughts, comments, feedback?
If you know ahead of time that the second broker lags the price of the first broker by X amount of time, then in your example, why not just buy at the second broker? What is the need to sell with the first broker?
  • #31
  • May 8, 2007 10:54am May 8, 2007 10:54am
The main reason im going with this broker is because they allow scalping/news trading.
I havent really looking into this arbitrage style trading, but I will definitely follow this thread.
  • #32
  • May 8, 2007 10:58am May 8, 2007 10:58am
Quoting SimonK
Which begs the question, why did they tell you not to?
Not really sure why. I will find out from my IB on why its such a big deal. Maybe the banks/providers get screwed in some way and come back to the brokers and cause problems with them?
  • #33
  • May 8, 2007 1:36pm May 8, 2007 1:36pm
  •  iya
  • | Joined Oct 2006 | Status: always protect yourself | 129 Posts
Quoting the_wizard
Forgetting actual arbitrage for a second...let's presume my broker quotes 1.9950 for the GBP and I KNOW the price is actually 1.9900.

My question is: Is it legal/fair to sell x amount short at 1.9950 knowing that my broker will be forced to correct the price, making me a huge profit?
Man, you have to tell us this broker, lol! How could he sustain this? Maybe if a big percentage of the customers don't know this, the money is from them? I'd say it's fair and legal, but the broker is obviously not competitive.

Oh, and this is actual arbitrage. Well, the term is probably not so clear. In it's original form it is "the opportunity to buy an asset at a low price then immediately selling it on a different market for a higher price." A strict definition means a risk free or a very low risk trade. But I would call any method with statistical edge arbitrage. It will always lead to a more efficient market.
  • #34
  • May 8, 2007 3:44pm May 8, 2007 3:44pm
Quoting mpathare
If you know ahead of time that the second broker lags the price of the first broker by X amount of time, then in your example, why not just buy at the second broker? What is the need to sell with the first broker?
The same question. If you know a broker is lagging, as soon as you see a spike in your "fast" broker, buy or sell in the lagging one (depending on spike direction).

Is my reasoning right?
  • #35
  • May 8, 2007 3:57pm May 8, 2007 3:57pm
Quoting Mr demark
that makes no F-ing sense, trading FX IS EXPLOITING that's why we do it? someone plz tell me i'm Right.

FX is all about exploitation. Do i have a point?
sure brokers say you cant do this in an agreement, but who says they will catch you? its not to hard to hide this activity, you just need a lot of accounts and a few crafty ideas. dont expect anyone in this game to play "fair", ALL is fair in love and trading. oh, and as ive said before, the broker arb is indeed legit.
Relax and be happy.
  • #36
  • May 8, 2007 7:16pm May 8, 2007 7:16pm
Quoting iya
My definition of trading is arbitraging – everything else is either investing or simply getting ripped off.
You are on the right track. It's called having an edge.That's the way to make money !! The 5 per cent of traders who are consistently profitable are a majority of arbitrageurs and scalpers.

All others with all their fancy systems and other Technical traders are just pouring money into a slot machine or poker machine, pulling the lever or the button and hoping to one day hit the jackpot. They are encouraged by the occasional small wins along the way. But we know who wins at this game !!! Have you ever wondered how is it that casinos rarely go broke if ever. It's because people keep playing a game where the opponent has an edge !!!

It's the same for forex. Have an edge or perish.
  • #37
  • May 9, 2007 3:41pm May 9, 2007 3:41pm
Quoting mpathare
If you know ahead of time that the second broker lags the price of the first broker by X amount of time, then in your example, why not just buy at the second broker? What is the need to sell with the first broker?
1st broker: 1.9912/1.9915
2nd broker: 1.9871/1.9883

In this case one would sell short @ 9912 and long @ 9883

If 1st broker was wrong and 2nd broker does not change the price then make pips via short.
sold @ 9912 and cover @ 9883


If the 2nd broker was wrong and the 1st broker does not change the price then make pips via long.
bought @ 9883 and sell @ 9912.

The reson is that you do not know which broker is right or wrong.

Correct me if I am wrong.


Interesting....but I would be surprised to see mis quotes that are worth taking...that is more than the spread x 2 (since one is using 2 brokers and would loose spread twice.

In other words one has to get more than 10 pips in gbpusd...5 pips spread per broker.

correct me if I am wrong
Pipology 101 student
  • #38
  • May 17, 2007 4:34am May 17, 2007 4:34am
Quoting milkcake
I do something similar, and I just trade with one broker, knowing that it is the slower one. You can make a lot of money doing this, and quite safely too. Let's just say the broker did take your money away, you are losing opportunity and some time, (maybe even your ego).

I made $5000 using 20 lots, 25 pips on NFP today. Why not take advantage of it if I can? And I agree that if they don't want this happening, then they better make the system faster with faster execution and faster quote to the point where there is no more "requote".

However, I want to say that in the end, you want to learn how to trade properly.
I have been making money the same way myself. Unfortunately the slow broker has caught up to the fast broker and the opportunity is not there anymore. Oanda is a slow broker but there spread during news is 20 pips.
Could you tell me your brokers millcake?
  • #39
  • Oct 22, 2007 3:09am Oct 22, 2007 3:09am
Quoting moneypip
I have been making money the same way myself. Unfortunately the slow broker has caught up to the fast broker and the opportunity is not there anymore. Oanda is a slow broker but there spread during news is 20 pips.
Could you tell me your brokers millcake?
I would never settle for a broker that alters their spreads during news time. That is unacceptable!
  • #40
  • Oct 22, 2007 7:25am Oct 22, 2007 7:25am
Quoting the_wizard
I would never settle for a broker that alters their spreads during news time. That is unacceptable!
Haha, that's funny, interbank quotes widen during the news... it seems pretty reasonable that brokers increase their spreads as well. otherwise they would be risking a loss...
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