Shadowed by Broker ...

Long time ago I was trading an systematic approach, based on a very simple rules that I backtested thoroughly over nearly 10 years of intraday data, with a sample of 2,300 trades. System was not problem, problem was that entry rules were darn simple, anybody with access to my trades would immediatelly suss out what I was doing. Like my broker for example.

After few months of trading I was in a profit and than I had this spooky conversation with a broker, who at one point just said: "I understand what you are doing."

Well trouble is that since than system stopped working. Ok, I know that no system lasts forewer, that aside, but I was left with a lingering suspicion that my broker simply tipped off one of his bigger clients. I was trading 1 lot future contracts, but he could easily had had clients that traded 50-100 contracts. That tip off would put 50-100 times more comission money into his pocket streight away.

Did anybody here had a similar experience or heard of something like that?

cheers,
dejan

Dejan,

If your broker sussed your system and relayed it to clients – to increase comm’s - the clients could then easily move to other brokers and the original broker would be the poorer.

The obvious thing would be for your broker to advise clients when to take trades (or operate discretionary accounts) without divulging the method, hence preserving the client base and comm’s.

Further, the broker could also make trades for his own account. He makes a wad for himself on the trades, and from delighted clients via comm’s who will then hopefully increase their trade sizes and thus increase his commission income.

Presumably this situation could not currently exist if the client (you) is executing his own trades. Unless one is dependent on ‘phoning orders via the broker (outmoded and inefficient).

Out of interest, which contract was it?

Grant.

It was German DAX Index future.

cheers, dejan