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Why does Automated trading never seem to work?

  • #21
  • May 12, 2010 11:44pm May 12, 2010 11:44pm
Quoting 2+2=4ex
the spread only puts the broker ahead versus you at the start of the trade. If the trade goes in your favor and you close it out at a profit then they lose money. In other words, if you're account balance grows, they lose. Therefore, they are after your money regardless of quantity of trades.
does that mean if i want to trade in lower timeframes, i should look for brokers who charge commission instead of those who offer low spread but never charge commission?
  • #22
  • May 13, 2010 12:03am May 13, 2010 12:03am
Quoting lmyyyks
does that mean if i want to trade in lower timeframes, i should look for brokers who charge commission instead of those who offer low spread but never charge commission?
Not necessarily. A low spread broker is good IF you are going to scalp. What I'm saying is in order to eliminate or reduce the broker manipulation of the small timeframes, trade larger timeframes. Or at least keep the trend direction in mind when scalping.
  • #23
  • May 13, 2010 12:17am May 13, 2010 12:17am
I think this could only apply to well-known robots that are used by many people. In that case they just increase the spread (like apparently Asian session spreads increased at many brokers due to popularity of FapTurbo). Or perhaps for individuals who trade large lots, but they would be targeted in any case, robot or no robot. In these cases they could just "slip" the order.

However forex brokers can't just alter prices because that would leave them vulnerable to arbitrage.

One thing for certain is that stops, etc, shouldn't be revealed to the broker, and it's best to have a separate dll for all the data processing, rather than relying on MQL. If your robot is successful, I see no reason why your broker wouldn't "piggy-back" on it, reducing its effectiveness.
  • #24
  • May 13, 2010 12:19am May 13, 2010 12:19am
Quoting sgrig
it's best to have a separate dll for all the data processing, rather than relying on MQL
how to do that?
i know nothing about dll, are there any soursces about that?
  • #25
  • May 13, 2010 12:25am May 13, 2010 12:25am
Quoting sgrig
However forex brokers can't just alter prices because that would leave them vulnerable to arbitrage.
How does this leave them vulnerable to arbitrage? They are increasing the retail traders spread on an order. Not altering the actual price.
  • #26
  • May 13, 2010 1:00am May 13, 2010 1:00am
I think it's apparent from a few of the posts here that many people do not really understand the role or process of retail brokers, and this thread certainly isn't the place to get that education. I would suggest researching some of the other more specific threads dedicated to explaining how brokers work as you will find it more beneficial than what I can offer here.

What I can say is that every fibre of retail brokers is geared towards making as much money from you as possible. And getting back to the topic of robots, they pose two very real issues for a broker:

1, If it's a good robot it can seriously increase the brokers risk and in a worse case scenario put them out of business.

2, They can be easily manipulated to provide an easy payday for your broker whether they pose a risk or not.

From what I learned from the owners of the particular broker in question, and the stories they told me about some of the other companies they mix with in this industry, there are few places on the planet with more unscrupulous and "willing to do anything to make money" kind of people. And robots are a real issue for them.....hence the reason as highlighted in my opening post, why you often see vastly different results in demo testing compared to live trading with them.
  • #27
  • May 13, 2010 1:44am May 13, 2010 1:44am
Quoting flotsom
They explained that some robots are extremely profitable, and the good ones would put them out of business.
If I were them, I will switch my business from broker to trader, and use that "extremely profitable robot" to trade my capital
  • #28
  • May 13, 2010 1:52am May 13, 2010 1:52am
Quoting 2+2=4ex
My advice is to always trade with long term in mind. Look at the big picture.
It's true, that is the way to go. But they know that, so they've got that covered too. They'll charge you outrageous swap points, so it becomes losing proposition to hold positions long term. You should see the rollover my goddamn broker charges.
  • #29
  • May 13, 2010 1:53am May 13, 2010 1:53am
Quoting sangmane
If I were them, I will switch my business from broker to trader, and use that "extremely profitable robot" to trade my capital
yes good idea!
  • #30
  • May 13, 2010 1:54am May 13, 2010 1:54am
Quoting sangmane
If I were them, I will switch my business from broker to trader, and use that "extremely profitable robot" to trade my capital

Sangmane... you are the f*cking:

http://www.sd68.k12.il.us/schools/or...vil_genius.jpg
  • #31
  • May 13, 2010 2:18am May 13, 2010 2:18am
Quoting Sim
Sangmane... you are the f*cking:
lol... just arrived at my home sweet home. whats up with your fibs thingy
  • #32
  • May 13, 2010 2:19am May 13, 2010 2:19am
check the thread lol it was so funny

what took you so long? did your ex army plane go 1 mile per hour hehehe
  • #33
  • May 13, 2010 12:17pm May 13, 2010 12:17pm
Quoting lmyyyks
how to do that?
i know nothing about dll, are there any soursces about that?
Just search for "using dll in metatrader". There is quite a lot of info of this.


Quoting 2+2=4ex
How does this leave them vulnerable to arbitrage? They are increasing the retail traders spread on an order. Not altering the actual price.
That's exactly what I'm saying! Altering the price would leave them vulnerable to arbitrage. Of course, increasing spreads doesn't hurt them.

Actually, I'm wondering, do the brokers actually have same data feed for all the customers? So if they want to screw some particular trader, can they increase the spread just for him, or do they have to increase the spread for everyone?
  • #34
  • May 13, 2010 12:28pm May 13, 2010 12:28pm
Quoting sgrig
Actually, I'm wondering, do the brokers actually have same data feed for all the customers? So if they want to screw some particular trader, can they increase the spread just for him, or do they have to increase the spread for everyone?
Certainly for the brokers I spoke to, they can manipulate the feed on a customer by customer basis. If we were using the same broker, the data that is passed to me can be very different to the data that is passed to you. It all depends on what they are trying to achieve with each individual client.
  • #35
  • May 13, 2010 12:50pm May 13, 2010 12:50pm
Quoting flotsom
Certainly for the brokers I spoke to, they can manipulate the feed on a customer by customer basis. If we were using the same broker, the data that is passed to me can be very different to the data that is passed to you. It all depends on what they are trying to achieve with each individual client.
That doesn't surprise me one bit. However a 1000 pip move is a 1000 pip move. They can't alter that. Maybe they can steal some pips from the top and/or bottom, but you're still walking away with a barrel full. Which is why I say trade towards the long term.
  • #36
  • May 13, 2010 1:18pm May 13, 2010 1:18pm
Interesting thread, and although it sounds plausible in many ways, I've a few questions:
1) You mentioned that they design robots to counter your algos.
How on earth could they reverse engineer your algo (aside from somehow seeing the algo itself). Why wouldn't all firms be doing this with other firms if that was the case? I just don't think it's conceptually possible to reverse engineer algos with even the slightest sophistication, given the transaction information alone. Heck, some guys bot could be using moon cycles as a signal; how would they reverse engineer that in order to know how to counter it?
2) Are you suggesting they reverse engineer the algo, or just by knowing you have a bot, intentionally attempt to sabotage you (by providing non-true quotes, which I wouldn't doubt in forex). By the same token, why wouldn't they just sabotage discrete profitable traders? I'd guess there is equal effort to both types of traders.
3) Imagine how much time they would have to dedicate to reverse engineering, several hundred algos. And if they were making your stops invalid, wouldn't you be able to monitor some price activity and verify it, then call them on it?
4) Secondly, this is likely a seemingly trivial concept, but I assume most bot engines codes are secure and opaque to the brokers. Otherwise, reverse engineering would be the only way to determine the algo.

P.S. I'm the biggest cynic on earth when it comes to brokers, and wouldn't put it past them to do anything within their legal means to profit off your losses. That being said, their method should still be a rationally logical one.
  • #37
  • May 13, 2010 1:42pm May 13, 2010 1:42pm
I have been working diligently on EA development for the better part of 5 months and I've been trading on-and-off for the better part of 10 years. I know that this can be a crooked business and I can see SOME truth in the OP's statement. But there's also some paranoia and some naiveté with regards to EA development.

First, if you are using an EA, why in the world would you be using SLs (or TPs for that matter)??? I'm not saying that your EA's strategy should not incorporate the theory of SLs, but that doesn't mean that those SLs should be transmitted to the broker as actual pending orders. IMHO, one of the huge advantages of an EA is that it doesn't sleep and it can monitor an open position every single time that it receives a new tick. If the position falls below a predetermined level (which can be saved in RAM - NOT in any format accessible by the broker) then close the position. Brokers cannot hunt SLs if you haven't transmitted any SLs to them.

Second, I love how everyone talks about all these magical EAs that get filthy rich in demo mode and then bomb out in live mode. Have you ever considered that maybe this isn't the brokers fault??? It is sooooooo tempting to put an EA on demo, watch it triple the account over the course of a day or a week, and then become flabbergasted because it doesn't perform exactly the same way over the next day or week on a live account. I have news for you - just because a strategy worked wonderfully last week doesn't mean that it's guaranteed to perform as well (or even close to it) this week. That's not due to maliciousness on the part of your broker. That's due to the markets themselves.

Third, there is only so much that a broker can do to manipulate your trades. If they started to perform massive manipulation on a routine basis, it would be clear to even the dumbest trader. Do I believe that a broker could routinely slip you for 2-3 pips (on the front and back end)? Absolutely. Do I believe that a broker could manipulate quotes for the purpose of hunting your stops (see my first point). Of course. Do I think that a broker could have ruined your trade if your EA shorted the EURUSD a month ago? NO. If you went short on the EURUSD a month ago and you kept the trade open, you're making a lot of money - period.
  • #38
  • May 13, 2010 1:50pm May 13, 2010 1:50pm
Quoting jamjamjam
1) You mentioned that they design robots to counter your algos.
The algos their robots use might include some kind of heuristic...

Example 1:
If your are too successful and your are trading almost 24h a day, then your broker would always deny your first attempt to initiate a trade (price mismatch or something like that --> requote). While your are human, you set another order but a not so well programmed robot may not open another order....

Example 2:
If your broker supsects you to use a robot, he will increase your slippage - for some robots this might be the end....
  • #39
  • May 13, 2010 2:01pm May 13, 2010 2:01pm
Quoting nightyhawk
The algos their robots use might include some kind of heuristic...

Example 1:
If your are too successful and your are trading almost 24h a day, then your broker would always deny your first attempt to initiate a trade (price mismatch or something like that --> requote). While your are human, you set another order but a not so well programmed robot may not open another order....

Example 2:
If your broker supsects you to use a robot, he will increase your slippage - for some robots this might be the end....
The problem I have with this logic, is as mentioned on my prior post, they could equally do the same to a successful discretionary scalper. So it is intentional sabotage to successful traders period, not specifically geared to counter bots. And again, no level of heuristics could reverse engineer an algo efficiently, it would be EXTREMELY difficult and time consuming, by which point, it would be more profitable to lift the algo then counter it (at which point, the algo or the markets have likely changed character).

I will say the following. I've read that when stat arb pairs trading first surfaced, brokers were initially complaining to the SEC to investigate why the traders at MS were doing so well. Well, once whoever looked into it, the cat was out of the bag, and everyone became a follower with large success for a time. At a certain point, once enough people know, the strategy becomes less efficient. What annoys me about that is that yes, those in the loop with connections, can and do get access to information on profitable strategies, with methods unavailable or not disseminated to the little guy; then employ it until the point the little guy finally catches wind (at which point the edge abates).
  • #40
  • May 13, 2010 2:12pm May 13, 2010 2:12pm
The dont have to figure out what EVERY trader is doing, but there are enough new users buying the big name commercial EA's (IE fap or mega...). All they would have to do is reverse engineer those EA's and Im sure it wouldnt be hard to spot the people using them when a rush of orders flood them around the same time. Those are the ones I think they would worry about and interfere with.

I think that it would be much harder for them to figure out someones own personally written EA, especially if that person never shared it, which is why I never share mine.
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