What does broker know? - page 2
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This is interesting. A few questions:
(1) Say you have a virtual stop set, either in an EA or mentally, and this price is hit. You check the spread, and it's very wide. Would you then just wait until the spread is more favorable? What if the market continues to go against you?
(2) Would you advise having a broker-level stop loss in addition to a virtual stop? The level would be much further away, basically as a fail-safe for unlikely contingencies.
No it's the way around.
Say your (shady) broker is trying to hit your (or many trader's) stop's and spikes the spread to 200 and back in a few ms (called a razor), then you can never intercept this if your stop was on the borker's server,
But if you run an EA with virtual stops, you can intercept this move and dynamically adjust your stops the other way, so further away in stead of closer.
Called dynamic spread adjustment, So it's the way around you first check the spread to what it was and then calculate the new values.
You can also record these events and plot them to see when and how many times they happen and on which broker's and etc to discover things that are normally hidden or lost, when you do not monitor them.
I would not advice to have any broker-stop loss what so ever, but this relies on other things such as risk involved and even geographic location, you would need a stable connection to pull it off, of course you can put a broker level stop on unrealistic values but that's just adding up to the risk of having to fight unwanted battles, as you know Financial markets are the most corrupt business in the world.
Marco vd Heijden:
Say your (shady) broker is trying to hit your (or many trader's) stop's and spikes the spread to 200 and back in a few ms (called a razor), then you can never intercept this if your stop was on the borker's server,
But if you run an EA with virtual stops, you can intercept this move and dynamically adjust your stops the other way, so further away in stead of closer.
Called dynamic spread adjustment, So it's the way around you first check the spread to what it was and then calculate the new values.
I guess I am still missing something.
I can understand adjusting (widening and narrowing) stops based upon average spread volatility, but you seem to adjust yours based upon a spike/razor. In the scenario you describe, would you widen your virtual stop the full 200 points?
Thank you for this post. A lot of interesting bits I will consider.
I guess I am still missing something.
I can understand adjusting (widening and narrowing) stops based upon average spread volatility, but you seem to adjust yours based upon a spike/razor. In the scenario you describe, would you widen your virtual stop the full 200 points?
Marco's illustration i too cannot figure out.
But as a simple solution to these *razors* is to keep track of the average spread and execute your virtual stop only if within acceptable range.
Enrique Dangeroux: Marco's illustration i too cannot figure out.
But as a simple solution to these *razors* is to keep track of the average spread and execute your virtual stop only if within acceptable range.
Fortunately, on my brokers, I have yet to experience such "razor" events and have never seen any stop hunting being carried out by them.
I use Virtual/Stealth stops for the reasons I have mentioned and not because of any "bad" practices by the broker.
Maybe I am just lucky it has not happened to me yet.
EDIT: And yes, I did in times monitor spread to detect this. I even posted the code in the CodeBase: SpreadTracker. but never detected any such "razors".
EDIT2: Obviously, I am not referring to the sharp widening of spread during News events. Those obviously I have had many times. I just have not witnessed any such events during normal times as a means to do stop hunting.
I guess I am still missing something.
I can understand adjusting (widening and narrowing) stops based upon average spread volatility, but you seem to adjust yours based upon a spike/razor. In the scenario you describe, would you widen your virtual stop the full 200 points?
Marco's illustration i too cannot figure out.
But as a simple solution to these *razors* is to keep track of the average spread and execute your virtual stop only if within acceptable range.
Spread widens, so your EA will add this spread to your stop.
Nothing fancy about it, it's the same calculation it just includes spread.
Executing within acceptable range will happen afterwards when the news spike or razor event is in it's rebalancing state and spread will shrink back to a 2-20.
Fortunately, on my brokers, I have yet to experience such "razor" events and have never seen any stop hunting being carried out by them.
I use Virtual/Stealth stops for the reasons I have mentioned and not because of any "bad" practices by the broker.
Maybe I am just lucky it has not happened to me yet.
Luck is on your side, it does exist i have seen it many years ago.
Spread widens, so your EA will add this spread to your stop.
Nothing fancy about it, it's the same calculation it just includes spread.
Executing within acceptable range will happen afterwards when the news spike or razor event is in it's rebalancing state and spread will shrink back to a 2-20.
I think I get it now. Your stop formula has spread built into it as a variable from the very beginning. Something like:
VSL = N + spread
I could see using "average spread" when setting VSL (order entry), then updating it with "instantaneous spread" henceforth throughout the life of the trade.