There has been a lot of talk on this forum lately about profiting from broker misquotes and I personally have been inundated with requests for me to reveal the name of my broker ever since I claimed it frequently offered significantly profitable opportunities.
I am not prepared to do this for two reasons:
1) Because I have found through experience that the more people that exploit these errors, the quicker the company fixes the mistake and the less opportunity I have to make money.
2) I don’t think it will help you all that much. The key to making money by doing this is not in just being given the name of a broker. It is in KNOWING your edge and that is usually a by product of KNOWING your broker. When I first started making large amounts of money doing this I sat down and tried to teach my best friend. Despite him understanding the concept and seeing exactly how I did it, he failed to make any money himself because he had no real understanding of how the price moved. The edges that I developed came to me after hours upon hours of watching prices move. Not charts. PRICES. This is where your broker comes in. Knowing your broker means knowing what they quote, how they quote, how their quoting differs from other brokers and so on and so forth.
So, instead of simply giving you a name, I am going to teach you how to find and profit from broker misquotes, yourself.
A (not so) brief history
Soon after I started spread betting I discovered, purely by chance, that the broker I traded with (I will refer to it as Broker A) significantly lagged another broker I used (Called Broker B).
The account I had (and still have) with Broker A was basic. It was an html platform, which meant that prices updated on a page refresh basis. Ultimately what this meant was that when you clicked on the buy or sell price you saw, you had no idea if this was the price that you were getting.
The only way to tell was to refresh the page to get the latest quote but then you had to re-enter your lot size and your stop again which inevitably caused a delay. Most of the time it would be fine but if the market was moving fast, then you could be filled a long way off.
Eventually, I found Broker B who quoted prices live and I opened an account with them. Watching the prices move I noticed with a good deal of excitement how the volatility increased during economic news releases.
Now being very new to this and trying every single way I could find to make money I decided to play the markets based on this volatility. This was my first attempt at news trading.
My strategy was simple – If the market shot up, I would open a long bet hoping for a continuation higher. If it went down, I would play the opposite way.
Now, it looked to me like the two brokers moved together so by using Broker B to see the live price, I figured I would know where the price was when I clicked Broker A.
One day, as the news came out, the market took off sharply and as soon as I saw that large jump in Broker B, I went long almost instantly with broker A.
Now when I got my fill back, I realised that I had actually been given the pre-spike price. As my account balance refreshed I suddenly saw a large profit and I instantly closed. Suffice to say, I tried this again and upon finding how well it worked, I then proceeded to trade this constantly.
Almost every day I would be at my computer at the time of the latest news and in the minutes before I would have my eyes glued to the live price, heart hammering in my chest. And every time the news was announced and the market spiked, I got in on the lagging broker and then closed out just as soon as the price corrected. This always resulted in a large and almost instantaneous win.
Now eventually this edge no longer worked. I presume the company realised what was happening from the consistent wins in mine (and no doubt others) accounts and they solved the problem. One day, when I bought, I got the “real”, higher, price and this starting happening each time. The prices between the two brokers now seemed to move in tandem and no longer lagged each other.
However, not long after, I noticed another edge. This was in broker B.
What I noticed was that Nymex Crude Oil would frequently suffer huge spikes in its price.
A quote would look like this:
51.40…51.40…51.80…51.40
You get the idea.
Now one day I decided to try and play one of these spikes and found that the broker was offering a three second guarantee on the quote you pulled up.
I soon worked out that what this meant was that if I pulled up a quote every time it spiked I would have a guaranteed price which I could then compare to the one in the background. If it corrected whilst my price was still valid, I would go long or short accordingly, then immediately close the position.
This worked incredibly well. I would be at work, with one eye on the chart, waiting for the spikes so I could take action. These happened every day and frequently throughout the day, too. Soon it got so that I was making far more than I earnt at work. As soon as work ended I would race home and sit there glued to the screen until the market closed.
At the time, it never occurred to me that this would ever end. I did it for months on end, every single day. I would go on a beach holiday and leave my girlfriend wandering around on her own while I went in the internet café because it was just too profitable a time to miss. There was never any risk. There was never any doubt that I could continue doing this. My account grew phenomenally from just a small deposit of a couple of hundred pounds. (It eventually got so big that I used it to get an interview with a prestigious trading firm but they wanted assurances I could trade without simply exploiting inefficiencies which I couldn’t demonstrate)
Eventually, my broker realised what was happening and the first I noticed, they stopped the three second guarantee.
Once this was gone I had no confirmation that the move I saw on the screen was “false” but by then I knew the market so well that I managed to continue to trade it profitably in exact the same way as before – buying or selling the spikes.
Then one day I noticed that it simply wasn’t behaving anymore. I was away at the time, in my usual internet café in France and I watched the prices and found they were not spiking like they used too. Now they were making just small jumps of around five ticks.
So I contacted the head trader at the company who told me that they had changed the Crude oil contract they derived their price from, from the full contract to the E-Mini to prevent this volatility. Well this pretty much ended my chances to make money but just to really confirm it, they put a timed delay on how often you could pull up a quote. So if you opened a position there was no way to close it quickly without getting a “you have requested a quote too frequently – please wait and try again” message.
After this I opened a few new accounts here and there but I felt disillusioned. I didn’t want to learn how to trade – I just wanted to make easy money as I had been doing.
Eventually I learnt to trade properly and although I am still not consistently profitable I decided to leave work to trade full time because I believe that if you watch a markets price day in day out, you will eventually find a way to trade it profitably.
I opened an account with a new broker - broker C and used them to trade normally.
Now, one day, a few months ago, I saw an opportunity.
On the day of the February mini-crash, I was avidly watching the Dow fall further and further when I noticed that the FTSE looked like it had hardly come off from the number I had for it in my head.
On close inspection I realised that the quote had frozen. It simply was not moving even as the US indices went through the floor. So I logged into another broker and checked and found that my broker was out by 100 points on this FTSE quote.
I immediately sold the maximum amount I had in the account short and waited. The quote was still frozen and it remained that way for what seemed like an age. I had just decided to wire in some more money and sell some more short when they closed the FTSE market.
It didn’t open all evening which caused me some consternation, particularly when the US market made an about turn and I saw my theoretical 100 point lead start to slim. However, by the morning I was still up 75 points and upon the open, I immediately offset and was allowed to keep the huge amount I made.
I started watching this broker very carefully. As soon as I got home from work I checked the charts for the day and found out that many different markets had suffered temporary “spiking sessions” just like I had made so much money on in crude oil.
Then one night, just a few weeks back, I actually caught one of these and made 55 points shorting at the highs.
As the market made several of these large spikes in succession, I managed to trade in and out frequently, selling at the top and buying as the price corrected. (Chart A is Broker C that was spiking, chart B is Broker B that was showing no spike in price at all – proving to me that the price was false)
I could have made much larger bets but I traded with a good degree of caution because I thought there was a likelihood that the broker would try and ruin the people that were doing this.
There were two ways that I was wary of. The first had to do with the duration the price remained static. At first it would remain at a high for several seconds, giving plenty of time to enter the market. But eventually, it would correct so quickly the probability was high that you could click as it changed and be filled at the bottom.
The broker I use sets automatic stops on your positions and I was also aware that a short position at a low (or even at a high) could have resulted in a trader being stopped out in an extremely large spike, as happened at 9.11pm, if the margin wasn't used carefully.
Being careful like this, I missed a lot of opportunities but still managed to increase my account by over 75% in 15 minutes.
So, this brings me up to the present and I hope, gives you an outline of different ways in which to make money from your broker.
How to find a broker
If you want to find a way to do this then you need to open several accounts with different brokers. There is no short way round this.
I would advise you open an account with as many brokers as you can and not necessarily the ones that get all the good reviews. Brokers sometimes get bad reviews for bad pricing activities but as you know, you can play these to your advantage.
How to find an opportunity
a) First of all you should pull up a price just before every major economic news release. Do any of the brokers lag the others?
b) Check the charts for every major market. This means not just forex but all the major indices. The commodities markets etc. Go down to the lower time frames such as 5 min to identify spikes (candles with long tails) and then go lower to the 1 minute or even to the tick by tick to see how long these false prices lasted. If spiking occurs, pull up a live price and WATCH IT.
c) Check the charts themselves against the real time price. YOU NEVER KNOW WHEN OR HOW YOUR EDGE WILL APPEAR. Sometimes you will see that the chart itself precedes the quote. This can happen if both are from different data flows. This is rare but I have seen it.
d) Always watch the respective markets if there has been a big move. If the Dow has had a huge down day where is the Dax and the FTSE? How about less obvious but related markets such as the Swiss Market Index? How about a market like Corn? If the front month has had a huge move, where are the lagging months?
These are just a few examples. To make money this way, the single most important thing is to watch the price and that in turn will help you identify your edge. You should have as many prices as you can confined to memory. Do not underestimate how important this is. Price is the most important aspect of this. You should know where all these markets are compared to where they were on the close of the previous session and on the open of the current one.
You have a head start if your broker quotes the daily change but be careful - I have found that some brokers can “lie” to you. I will give you an example of this. My broker gives me a + or a – figure next to the price to tell me at a glance whether the market is up or down and by how much on the day. I realised after a time that this could be very misleading. A market for example could have a -20 even if it had gapped up 100 but was now coming off and was down 20. KNOW THE REAL MOVEMENT.
So there you have it. Please feel free to ask questions, if I can help anyone I will – but do not ask me what brokers I use.
If you are determined, you can find this out for yourself. If you had any idea how much money I had made doing this, you wouldn’t hesitate.
I ask one more thing – Please do not QUOTE this post in your replies. I will be editing it to add more - this is a work in progress.
The Wizard
I am not prepared to do this for two reasons:
1) Because I have found through experience that the more people that exploit these errors, the quicker the company fixes the mistake and the less opportunity I have to make money.
2) I don’t think it will help you all that much. The key to making money by doing this is not in just being given the name of a broker. It is in KNOWING your edge and that is usually a by product of KNOWING your broker. When I first started making large amounts of money doing this I sat down and tried to teach my best friend. Despite him understanding the concept and seeing exactly how I did it, he failed to make any money himself because he had no real understanding of how the price moved. The edges that I developed came to me after hours upon hours of watching prices move. Not charts. PRICES. This is where your broker comes in. Knowing your broker means knowing what they quote, how they quote, how their quoting differs from other brokers and so on and so forth.
So, instead of simply giving you a name, I am going to teach you how to find and profit from broker misquotes, yourself.
A (not so) brief history
Soon after I started spread betting I discovered, purely by chance, that the broker I traded with (I will refer to it as Broker A) significantly lagged another broker I used (Called Broker B).
The account I had (and still have) with Broker A was basic. It was an html platform, which meant that prices updated on a page refresh basis. Ultimately what this meant was that when you clicked on the buy or sell price you saw, you had no idea if this was the price that you were getting.
The only way to tell was to refresh the page to get the latest quote but then you had to re-enter your lot size and your stop again which inevitably caused a delay. Most of the time it would be fine but if the market was moving fast, then you could be filled a long way off.
Eventually, I found Broker B who quoted prices live and I opened an account with them. Watching the prices move I noticed with a good deal of excitement how the volatility increased during economic news releases.
Now being very new to this and trying every single way I could find to make money I decided to play the markets based on this volatility. This was my first attempt at news trading.
My strategy was simple – If the market shot up, I would open a long bet hoping for a continuation higher. If it went down, I would play the opposite way.
Now, it looked to me like the two brokers moved together so by using Broker B to see the live price, I figured I would know where the price was when I clicked Broker A.
One day, as the news came out, the market took off sharply and as soon as I saw that large jump in Broker B, I went long almost instantly with broker A.
Now when I got my fill back, I realised that I had actually been given the pre-spike price. As my account balance refreshed I suddenly saw a large profit and I instantly closed. Suffice to say, I tried this again and upon finding how well it worked, I then proceeded to trade this constantly.
Almost every day I would be at my computer at the time of the latest news and in the minutes before I would have my eyes glued to the live price, heart hammering in my chest. And every time the news was announced and the market spiked, I got in on the lagging broker and then closed out just as soon as the price corrected. This always resulted in a large and almost instantaneous win.
Now eventually this edge no longer worked. I presume the company realised what was happening from the consistent wins in mine (and no doubt others) accounts and they solved the problem. One day, when I bought, I got the “real”, higher, price and this starting happening each time. The prices between the two brokers now seemed to move in tandem and no longer lagged each other.
However, not long after, I noticed another edge. This was in broker B.
What I noticed was that Nymex Crude Oil would frequently suffer huge spikes in its price.
A quote would look like this:
51.40…51.40…51.80…51.40
You get the idea.
Now one day I decided to try and play one of these spikes and found that the broker was offering a three second guarantee on the quote you pulled up.
I soon worked out that what this meant was that if I pulled up a quote every time it spiked I would have a guaranteed price which I could then compare to the one in the background. If it corrected whilst my price was still valid, I would go long or short accordingly, then immediately close the position.
This worked incredibly well. I would be at work, with one eye on the chart, waiting for the spikes so I could take action. These happened every day and frequently throughout the day, too. Soon it got so that I was making far more than I earnt at work. As soon as work ended I would race home and sit there glued to the screen until the market closed.
At the time, it never occurred to me that this would ever end. I did it for months on end, every single day. I would go on a beach holiday and leave my girlfriend wandering around on her own while I went in the internet café because it was just too profitable a time to miss. There was never any risk. There was never any doubt that I could continue doing this. My account grew phenomenally from just a small deposit of a couple of hundred pounds. (It eventually got so big that I used it to get an interview with a prestigious trading firm but they wanted assurances I could trade without simply exploiting inefficiencies which I couldn’t demonstrate)
Eventually, my broker realised what was happening and the first I noticed, they stopped the three second guarantee.
Once this was gone I had no confirmation that the move I saw on the screen was “false” but by then I knew the market so well that I managed to continue to trade it profitably in exact the same way as before – buying or selling the spikes.
Then one day I noticed that it simply wasn’t behaving anymore. I was away at the time, in my usual internet café in France and I watched the prices and found they were not spiking like they used too. Now they were making just small jumps of around five ticks.
So I contacted the head trader at the company who told me that they had changed the Crude oil contract they derived their price from, from the full contract to the E-Mini to prevent this volatility. Well this pretty much ended my chances to make money but just to really confirm it, they put a timed delay on how often you could pull up a quote. So if you opened a position there was no way to close it quickly without getting a “you have requested a quote too frequently – please wait and try again” message.
After this I opened a few new accounts here and there but I felt disillusioned. I didn’t want to learn how to trade – I just wanted to make easy money as I had been doing.
Eventually I learnt to trade properly and although I am still not consistently profitable I decided to leave work to trade full time because I believe that if you watch a markets price day in day out, you will eventually find a way to trade it profitably.
I opened an account with a new broker - broker C and used them to trade normally.
Now, one day, a few months ago, I saw an opportunity.
On the day of the February mini-crash, I was avidly watching the Dow fall further and further when I noticed that the FTSE looked like it had hardly come off from the number I had for it in my head.
On close inspection I realised that the quote had frozen. It simply was not moving even as the US indices went through the floor. So I logged into another broker and checked and found that my broker was out by 100 points on this FTSE quote.
I immediately sold the maximum amount I had in the account short and waited. The quote was still frozen and it remained that way for what seemed like an age. I had just decided to wire in some more money and sell some more short when they closed the FTSE market.
It didn’t open all evening which caused me some consternation, particularly when the US market made an about turn and I saw my theoretical 100 point lead start to slim. However, by the morning I was still up 75 points and upon the open, I immediately offset and was allowed to keep the huge amount I made.
I started watching this broker very carefully. As soon as I got home from work I checked the charts for the day and found out that many different markets had suffered temporary “spiking sessions” just like I had made so much money on in crude oil.
Then one night, just a few weeks back, I actually caught one of these and made 55 points shorting at the highs.
As the market made several of these large spikes in succession, I managed to trade in and out frequently, selling at the top and buying as the price corrected. (Chart A is Broker C that was spiking, chart B is Broker B that was showing no spike in price at all – proving to me that the price was false)
I could have made much larger bets but I traded with a good degree of caution because I thought there was a likelihood that the broker would try and ruin the people that were doing this.
There were two ways that I was wary of. The first had to do with the duration the price remained static. At first it would remain at a high for several seconds, giving plenty of time to enter the market. But eventually, it would correct so quickly the probability was high that you could click as it changed and be filled at the bottom.
The broker I use sets automatic stops on your positions and I was also aware that a short position at a low (or even at a high) could have resulted in a trader being stopped out in an extremely large spike, as happened at 9.11pm, if the margin wasn't used carefully.
Being careful like this, I missed a lot of opportunities but still managed to increase my account by over 75% in 15 minutes.
So, this brings me up to the present and I hope, gives you an outline of different ways in which to make money from your broker.
How to find a broker
If you want to find a way to do this then you need to open several accounts with different brokers. There is no short way round this.
I would advise you open an account with as many brokers as you can and not necessarily the ones that get all the good reviews. Brokers sometimes get bad reviews for bad pricing activities but as you know, you can play these to your advantage.
How to find an opportunity
a) First of all you should pull up a price just before every major economic news release. Do any of the brokers lag the others?
b) Check the charts for every major market. This means not just forex but all the major indices. The commodities markets etc. Go down to the lower time frames such as 5 min to identify spikes (candles with long tails) and then go lower to the 1 minute or even to the tick by tick to see how long these false prices lasted. If spiking occurs, pull up a live price and WATCH IT.
c) Check the charts themselves against the real time price. YOU NEVER KNOW WHEN OR HOW YOUR EDGE WILL APPEAR. Sometimes you will see that the chart itself precedes the quote. This can happen if both are from different data flows. This is rare but I have seen it.
d) Always watch the respective markets if there has been a big move. If the Dow has had a huge down day where is the Dax and the FTSE? How about less obvious but related markets such as the Swiss Market Index? How about a market like Corn? If the front month has had a huge move, where are the lagging months?
These are just a few examples. To make money this way, the single most important thing is to watch the price and that in turn will help you identify your edge. You should have as many prices as you can confined to memory. Do not underestimate how important this is. Price is the most important aspect of this. You should know where all these markets are compared to where they were on the close of the previous session and on the open of the current one.
You have a head start if your broker quotes the daily change but be careful - I have found that some brokers can “lie” to you. I will give you an example of this. My broker gives me a + or a – figure next to the price to tell me at a glance whether the market is up or down and by how much on the day. I realised after a time that this could be very misleading. A market for example could have a -20 even if it had gapped up 100 but was now coming off and was down 20. KNOW THE REAL MOVEMENT.
So there you have it. Please feel free to ask questions, if I can help anyone I will – but do not ask me what brokers I use.
If you are determined, you can find this out for yourself. If you had any idea how much money I had made doing this, you wouldn’t hesitate.
I ask one more thing – Please do not QUOTE this post in your replies. I will be editing it to add more - this is a work in progress.
The Wizard
Attached Image(s) (click to enlarge)
