An interview with highbury fx

This is a discussion on An interview with highbury fx within the Spread Betting & CFDs forums, part of the Commercial category; Originally Posted by counter_violent Ok well I have a question. Do traders who automate fare any better? its a fairly ...

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Old Dec 8, 2016, 3:37pm   #31
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Ok well I have a question.

Do traders who automate fare any better?
its a fairly general question so i'll generalise with my answer. I find that the traders that fair best of all are traders that take a position, attach a stop and a limit order and walk away until one of them is triggered. to be more accurate with an answer for automated systems we would need to catogorise them such as scalping systems, intraday systems, high leverage/low leverage, long time frame. They're all so different that you couldn't get an accurate view unless you separated them in to categories.

the trouble with automated strategies is they break. so many of them work away taking a few pips here and a few pips there but once the market spikes or something unusal happens a lot of them break or go haywire. It isn't unusual for us to face a blackbox that is having some reasonable success only for it to go nuts and blow up the accounts. brokers will tend to be patient with these systems for that very reason.

Last edited by counter_violent; Dec 10, 2016 at 3:49pm. Reason: spelling
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Old Dec 8, 2016, 4:04pm   #32
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Hi highbury fx,
Thank you for your insights and for being so candid.

I'm sure you won't comment on anything that you don't want to but, by the same token, I don't want to put you in the position of having to politely abstain from answering or side stepping 'difficult' questions! With this in mind, I'll keep my question very general - feel free to ignore it altogether if you wish . . .

SB firms take the other side of their clients trades - this is well known and accepted. By extension, many people will argue that SB firms actively want/need their clients to lose so that they win. Some folk claim that the SB firm will employ dirty tricks (price spikes, cancelled orders, slippage plus a bit more etc.) to accounts that are consistently profitable. Ultimately, if that doesn't work and the client remains profitable, they will decline that client's business and close the account.

My (general) question is: would you care to comment on any of the above?
Thanks in advance,
Tim.
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Old Dec 8, 2016, 4:28pm   #33
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Hi highbury fx,
Thank you for your insights and for being so candid.

I'm sure you won't comment on anything that you don't want to but, by the same token, I don't want to put you in the position of having to politely abstain from answering or side stepping 'difficult' questions! With this in mind, I'll keep my question very general - feel free to ignore it altogether if you wish . . .

SB firms take the other side of their clients trades - this is well known and accepted. By extension, many people will argue that SB firms actively want/need their clients to lose so that they win. Some folk claim that the SB firm will employ dirty tricks (price spikes, cancelled orders, slippage plus a bit more etc.) to accounts that are consistently profitable. Ultimately, if that doesn't work and the client remains profitable, they will decline that client's business and close the account.

My (general) question is: would you care to comment on any of the above?
Thanks in advance,
Tim.
Hi Tim

thank you, no prob.

it all depends what type of license or model the spreadbet firm has.

SB firms that run B books want their clients to lose. they may say otherwise but that is how they anticipate making most of their money.

SB firms that run STP models/A book models want their clients to do lots of volume, not make too much money (in order to not annoy their liquidity providers) and not lose too much money (in order to stay in the game).

SB firms don't need to resort to dirty tricks such as price spikes or cancelled orders. Slippage is different - its hard for the client to really prove that they shouldn't have been slipped 1 pip or half a pip. lots of half a pips really add up and if a broker decided to slip each order or every 3rd order 0.5 pip, 1 pip, it would be a dirty thing to do but I wouldn't like to say for sure that that doesn't happen. It used to back in 06, 07 that kind of time but now? maybe - even probably at some places.

B book firms can deal with profitable accounts by hedging them and giving their liquidity providers (i'll call them LP from now) a heads up that they may wish to widen spreads in certain products so they avoid that flow and it can be passed anonymously to the market. it isn't so much the making profit that upsets brokerages, its the manner in which its done by some clients that causes offense. these clients are usually sent on their way.
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Old Dec 8, 2016, 4:41pm   #34
 
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Highbury – thanks for an extremely informative and interesting thread. Two things are apparent to me:

1. People such as yourselves know more about their customers and how they work/don't work than they do themselves.
2. The amount of research and data analysis you must do on your customers' trading is quite remarkable – and of course you wouldn't do it if it wasn't worthwhile.

There's some good guidance in your answers for those who wish to pick it up. Many thanks.
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Old Dec 8, 2016, 5:18pm   #35
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Originally Posted by highbury fx View Post
Hi Tim

thank you, no prob.

it all depends what type of license or model the spreadbet firm has.

SB firms that run B books want their clients to lose. they may say otherwise but that is how they anticipate making most of their money.

SB firms that run STP models/A book models want their clients to do lots of volume, not make too much money (in order to not annoy their liquidity providers) and not lose too much money (in order to stay in the game).

SB firms don't need to resort to dirty tricks such as price spikes or cancelled orders. Slippage is different - its hard for the client to really prove that they shouldn't have been slipped 1 pip or half a pip. lots of half a pips really add up and if a broker decided to slip each order or every 3rd order 0.5 pip, 1 pip, it would be a dirty thing to do but I wouldn't like to say for sure that that doesn't happen. It used to back in 06, 07 that kind of time but now? maybe - even probably at some places.

B book firms can deal with profitable accounts by hedging them and giving their liquidity providers (i'll call them LP from now) a heads up that they may wish to widen spreads in certain products so they avoid that flow and it can be passed anonymously to the market. it isn't so much the making profit that upsets brokerages, its the manner in which its done by some clients that causes offense. these clients are usually sent on their way.
Is it safe to say that :

1- Profitable swing traders dont bother you one bit .

2- Profitable scalpers may force you to put them on your watchlist - you keep an eye on their activity - .
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Old Dec 8, 2016, 5:36pm   #36
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Is it safe to say that :

1- Profitable swing traders dont bother you one bit .

2- Profitable scalpers may force you to put them on your watchlist - you keep an eye on their activity - .
swing traders will generally do better than day traders so its not entirely true to say they wont bother me. its strange because none of it bothers me too much and all of it bothers me. I trust my model is right and that we will have swings in our pnl depending on volatily but that doesn't mean to say we're nonchalant about anything. our clients are trying to win money from us and we need to make sure we know all about them and what they're doing. we don't want to be a nuisance and get in their way but by the same token we have to provide evidence all of the time that we are on top of our business. if things go wrong at a brokerage you lose your shirt potentially.

profitable scalpers are a problem even though we're stp. they wont win the money from us but they will win it from people that provide me services for me to be a profitable business. if I can help protect my lp on occasion then I will for the better conditions that that will ultimately give to all my other 'non profitable scalper' clients.

my problems aren't so much the day to day trading - that's all taken care of by remarkable infrastructure that firms like us operate within. the problems are regulatory, that's what takes our time and efforts. for example its easy to say ok the new rule is the leverage cant be more than 50:1. ok, no worries we have to accept that and for all new clients and clients with no open position they can be moved to groups that have new leverage limits in place. but what about someone who has $900 on his account and 1 lot of eur/usd open? once I move the leverage to 50:1 it's going to put him on margin call and close his position automatically. how do I ensure that we act in a fair way to those clients? that has to be considered, planned and implemented and that will take up far more of our time than watching someone swing trade or take 0.1 pip off me 50 times a day.
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Old Dec 8, 2016, 6:01pm   #37
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tar started this thread https://www.interactivebrokers.com/i...p#open-account


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Old Dec 8, 2016, 6:16pm   #38
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Hi highbury

Have you heard of WH Selfinvest? What sort of DNA do they have?

What do you think about FxPro's DNA?

Thanks

Last edited by metrader; Dec 8, 2016 at 6:25pm.
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Old Dec 8, 2016, 6:56pm   #39
 
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Hi Highbury, this thread's great! My question is: What is your definition of scalping?
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Old Dec 9, 2016, 10:14am   #40
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Originally Posted by metrader View Post
Hi highbury

Have you heard of WH Selfinvest? What sort of DNA do they have?

What do you think about FxPro's DNA?

Thanks
hi metrader

I would prefer to not critique other firms if that's ok.

thank you
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Old Dec 9, 2016, 10:18am   #41
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Hi Highbury, this thread's great! My question is: What is your definition of scalping?
someone who tries to take advantage of a price that is slow to update. usually by fractions of a second.
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Old Dec 9, 2016, 11:18am   #42
 
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hi highbury, ive a few questions.

Slippage on market and stop orders exist in any market although slippage on limit orders exists in synthetic markets only (i think )

1) How would you treat a constantly profitable limit order only client who trades with you respectfully. Would there ever come a time when you would negotiate / restrict / remove this situation for the client. Ie so as to protect relationships with your LPs perhaps.

2) Would you or have you ever witnessed a broker coat tailing a profitable client who they deem to be a low risk safe pair of hands.

3) Aside from the clients who exploit your pricing (rely on latency / no slips to profit etc). Whats the general view of broker to client, is it fair to say you always want them, profitable or not.

4) Do your LPs have or every request trading data of individual clients, do they ever pressure you to give a particular client the elbow.

Cheers for doing this btw
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Old Dec 9, 2016, 12:34pm   #43
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Originally Posted by darktone View Post
hi highbury, ive a few questions.

Slippage on market and stop orders exist in any market although slippage on limit orders exists in synthetic markets only (i think )

1) How would you treat a constantly profitable limit order only client who trades with you respectfully. Would there ever come a time when you would negotiate / restrict / remove this situation for the client. Ie so as to protect relationships with your LPs perhaps.

2) Would you or have you ever witnessed a broker coat tailing a profitable client who they deem to be a low risk safe pair of hands.

3) Aside from the clients who exploit your pricing (rely on latency / no slips to profit etc). Whats the general view of broker to client, is it fair to say you always want them, profitable or not.

4) Do your LPs have or every request trading data of individual clients, do they ever pressure you to give a particular client the elbow.

Cheers for doing this btw
hi darktone

1. limit orders normally suit brokers, theyre a take profit instruction (usually) and the emotion of it being filled is much better than when a stop is filled. brokers therefore get far fewer complaints about limit fills than stop fills. the difficulty is limit orders at spreadbet firms are often one touch full amount and that makes it hard if the price is touched once and then retreats - the client may expect the full amount to be done but the broker may have only managed to hedge some of it. as an stp broker the only concern I have with my clients making money is if they upset our lp providers and that may need to be addressed. i'd address it by talking to my lp's and letting them know we had a regularly profitable client that was trading this way. if the client was materially good, ie, his profits regularly wiped out the thousands of other trades from the 'normal' client pool we would look to route his business to an anonymous liquidity stream. we'd be upfront with the client and tell him he was being priced from different liquidity and would he be happy with that. if he wasn't we'd have little alternative but to tell him we cannot accept his business anymore. this has happened to me only a handful of times previously.

2. if a B book firm hedges a profitable client they are effectively coat tailing him by not assuming the risk. systems today allow brokers to hedge, part hedge or over hedge a particular client or product. I've never done it as I don't like the practise, it isn't my model. I never took a position, I always inherited the other side of positions from my clients. STP firms are allowed no market risk and therefore cannot coat tail.

3. we always want as many clients as we can get. we do not want clients that need to be managed individually unless they are game changing. we want clients that slot in to our business and form part of a mass model enterprise. we will make money from clients who are profitable so we still want those types of clients. our lp's understand they need to take the bad as well as the good. the risk to the lp is that they get more bad than good.

4. they never request the data. we cant give that to them. our lp's deal with us and our clients deal with us. therefore the only client that our lp see's is us. they cannot identify any particular client individually unless we send those clients trades down a different pipe. it would still be in our name but it would be a heads up to the lp that they are on the receiving end of what is potentially toxic business. an lp wouldn't tell us to get rid of a client but they may tell us to take their pricing away from the blend for that client.
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Old Dec 9, 2016, 12:47pm   #44
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tar started this thread May i state the bleedin obvious :

For traders with a small account , trade cfds or sb until you grow your account , until then there will be no worries i am sure , then move to DMA , this has to happen sooner or later if you are serious about trading .
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Old Dec 9, 2016, 2:02pm   #45
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highbury, thanks for taking the time to answer questions.
My question relates to volume. In relation to the rare amazing traders what is the frequency of days they trade? I've come to conclude if you trade every single day the house always wins (just like a casino). I've figured at best you get about 16/20 days the rest (maybe more) are completely random....june 2016 is a perfect example of several random days. My other question is what are the characteristics of these amazing traders in terms of trading the first hour of market open? Do they open their positions right away or wait? Lastly on days like the last 3 days where markets shot straight up.....with no end in sight for a pullback...do you notice anything strange the next day in the first few hours?
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