Best system to take advantage of negative commission

As many will know, MB Trading pay for limit trades. They say they want to encourage liquidity, so for each lot I trade in cable I get paid $3 at each end. So, even if I get in and out at the same price I make around $6. I'm looking for suggestions as to the best way to take advantage of this. I've come up with a few ideas but it would be interesting to see what others think about the best way to exploit this facility while it lasts.

Normally I trade just news but it seems to me that I should be able to take advantage of what MB are offering.

I use NT7 and am thinking of some sort of high frequency automated system that doesn't look to profit on each trade other than from the negative commission.

Any ideas and discussion would be welcome.

I'm a long-time fan of MB Trading and NinjaTrader.

It is a great offering but...
you have to get someone to take the other side of the trade.

Of course, when you are wrong...the market can (and lately does) move fast/far against you. Is it those times it would be advantageous to get out quickly and pay the commission?

You still have to be directionally right (or at least more right than others).
The "others" are going to be the ones taking your trade, from your limit order.

I think it comes down to two basic scenarios:

1. You put the risk on the dealer (or other trader) by being able to execute quickly (at market) but pay more.

2. You take the risk (and wait for your limit to be traded against) but are compensated for your risk.

I gave it much thought when it was initially introduced ( to MB Trading), but even though I scalp often and quickly.... I feel I need to be able to be executed at market many times to get the best price.

Perhaps you can do something amazing.
Good Luck.

Thanks for the post. My ideas were around waiting for the spread on any pair to be such that I could get inside and to be at the front of the queue on both bid and ask with OCO orders. Then whichever side was taken, immediately offer the same price to get out.

The question is of course, what percentage of the time would the trade walk away and not return. I doubt it would be high enough to make the system unprofitable but I suspect the only way to test it is to get an NT7 system built, which I'll probably do myself over the next few weeks.

PS I did it manually for a couple of hours on one pair today (cable) and made $50 without sweating

Use the T101 Hedge Sets opened in a demo account and watch for the most likely pair to junmp from minor lose to minor win and place a buy/sell limt with a minimal TP. Do this over and over while watching the jumping pairs. Lots of activity in this area by Brijon, Steve Hopwood, and MetaTrader.

Regards,
KingHigh

Thanks for the suggestion. I'll take a look at 101 although I'll avoid posts by Brijon as I find his posts completely incomprehensible.

Any great strategies or automation for this situation Dr Who?
Perhaps you are making so much $$$$ you'd rather keep quiet?
Just curious.

I'll tell you one word - hedging.

Open second account with MBT. Open trades on both accounts in opposite direction. One account win - second account lose, your money is safe and you got your $6 commission.

Let me know, if this will work.

Josef

Do you actually have to create a new bid/offer price within the order book? (different 5th digit)
Or can you 'add to liquidity' at a existing price level and wait to get executed?
[and still get paid]

Has anybody tried the hedging idea? Or any new ideas on how to profit on the commission?

solution....

http://codebase.mql4.com/6601#27539


http://codebase.mql4.com/4961


first opens two oposite orders simultaniously, the second closes all positions quicker than we can

Even if you automate this system your Forex broker can close your account if you keep trading that way.

That doesn't sound right to me. This isn't based on latency trading, it's an ECN. If you get your order filled then someone accepted the offer.

Of course, the problem would be when trades go against you. Winning a commission to risk losing an adverse market move.

@Price-

Since there are 2 (buy and sell) positions initiated simultaneously in a hedge, there is no question of an adverse move affecting you. A profit/loss in your buy position would be offset by a loss/profit in your sell position.

What would actually be the challenge, would be to overcome the broker's spread (theoretically, two times spread in a hedge).

Regards.

find something that moves flat and rebate trade that.
Its not (or shouldn't be illegal) as traders do this in the equaties markets, C was a great candidate up until a few months ago.
Careful though, as its almost like picking up pennies in front of a steamroller.

not with an ECN.

I have a second account pending funding now. I am going to try and place opposite limit orders at the same strike price in two accounts. Then when they open I will try to close them at same strike price with a limit order.

I don't think they can shut your account down either. I think the risk for me lies in if you happen to fill someones stop loss and not your position, then you have full exposure.

Always read the fine print. From MBT wesite:

"The term "Payment for Limit Order" refers to a non-market order which is not immediately executable and rests on the internal limit order book for some period of time, thus adding liquidity when another order of equal or greater value fills with the resting order. The Actual Total Paid to Clients number is updated every five minutes and stops counting during the weekend when the market is closed. The number calculates from the launch of Pay for Limits, which was January 31, 2011. Due to higher cost of business in China, “Get paid for limit orders” is not available for Chinese residents. All Chinese residents have a fee of 2.95 for all order types. Accounts with special commission rates are excluded from Payment for Limit Orders. There is a minimum fee of $0.01 for all Forex and spot trading orders that take liquidity."

So if you place two orders at the same price inside the spread they will fill each other and you will not paid, instead you will pay the normal commision. Garenteed loss.

Place the orders outside the spread and one order will fill at the next available liquidity pool, which you will pay commisions on, and one will be a pending order, which you will get paid for. Don't know MBTs comm rate or what they pay, but guessing it will about balance out. So yeah, you get a comm free trade, but it is still just a directional trade that relies on price going the right way for you before you run out of margin. It is not an arb or anything.

Looks like with these conditions the opertunity for a risk free profit is not present here. But will cut down comms or eaven reverse them completely so you get paid a bit if you use limit orders in your strategy

Correct.

Since my posts in this thread early on... I have switched back to MB Trading.

Consider it a huge reduction in trading costs.... or the first "glimmer" of rebate trading in forex (like in stocks).

I scalp very short term...with a fairly decent position size relative to my account
(currently about 10 pips being 3% risk).

I use a risk reward of about 3:1 and try to hit a high percentage of my trades (+70%).
I use limit orders for entry and exit more than 90% of the time.
I'll attempt to "flat" trades if within a few minutes they don't go my way.
Two minutes after that attempt, I'll close out losers.

It is an ECN environment, you can beat the spread and get "paid".
With my set-up, if I only "breakeven" on 10 trades a day... I still make 1% (from rebate), but I aim to do better.

Keep in mind, I have been a 1 min TF scalper for two years. I didn't just convert to this a month or two ago.
I "tweaked" my technique to take advantage of this "Pay for Limits" opportunity.

I don't recommend trying to scalp this ECN with MT4 at all. Dekstop Pro is insanely faster, as you can enter, exit, and cancel orders with 1/10th pips difference in fractions of a second, if you practice with their "level 2" market depth.

But no ..."hedging" is not the way to approach this...
there will always be risk before you get two sides executed...

Approach this as -
If you can trade at least flat over 100 trades (with mostly limit orders).... you will be up xx%.