Let's say I do have 2 scalping strategies trading 1 asset.
First one goes long when signal appears.
Second one goes short when signal appears.
(These signals are not the same, completely opposite behaviour)
Can I open 2 separate accounts with 2 separate balances within one broker and set strategy no.1 to the first account and strategy no. 2 to the second account?
I don't really want my algorithms cancelling each other, scaling out, reversing and so on.
I will in fact be hedging myself at the times. Also, from technical point of view I might sell to myself and buy from myself. Algos are directional, not HFT by any means.
I am curious if this is prohibited by any regulations, and if not, do brokers provide such service?
From technical side I would have two separate Sierra Chart instances running independently.
Would I need two separate Sierra Chart accounts with 2 separate data feeds to connect 2 different brokerage acounts or different instance of platform can be connected to a different broker?
So far this is best I can explain it. I'd be really thankfull for a feedback whether it is doable.
Cheers.
Can you help answer these questions from other members on futures io?
You may well run into some problems, but the case is not necessarily clear.
First off, there's a rule that prohibits what are called "wash trades," which usually means going long and short the same thing at the same time.
Here's the rule itself (not easy reading, but push though it):
Rule 534 (“Wash Trades Prohibited”)
No person shall place or accept buy and sell orders in the same product and expiration
month, and, for a put or call option, the same strike price, where the person knows or
reasonably should know that the purpose of the orders is to avoid taking a bona fide market
position exposed to market risk (transactions commonly known or referred to as wash
trades or wash sales). Buy and sell orders for different accounts with common beneficial
ownership that are entered with the intent to negate market risk or price competition shall
also be deemed to violate the prohibition on wash trades. Additionally, no person shall
knowingly execute or accommodate the execution of such orders by direct or indirect
means.
If you dig through the not-exactly-clear language, you will see that the concern is to prevent traders from creating the impression of real market activity when there isn't any (that is, no real market risk is taken,
but there's activity being produced by the buying and selling.) This might be done to hype an instrument and create an interest by other traders and suck them in to trade it. If brokers see this, they are supposed to stop it.
But things aren't necessarily that simple. As I understand you, you want to have two algos running, maybe in different accounts, and they may not always make the same trade or have the same long or short positions (or be one may be long and one short), because they are implementing different strategies. Does this violate the wash rule?
There is a post by @kevingkdog in another thread that goes into a similar situation he was in. The broker told him he was in violation of exchange rules, but he was able to convince them that in his situation he was not -- but he had to argue the point up the chain to the CFO of the firm. Essentially, he had different strategies following different logic, and they might do different things. Importantly, they were not creating fake activity by deliberately offsetting each other. Would you have an issue with your broker? You might, and then you would have to make your case that you didn't violate the rule. I don't know what your outcome would be.
Technically yes it violates Exchange rules (I don't know about it violating a hedging rule). The exchange can look at this as you trading against yourself in order to create fake volume or open interest. Just this week, I got a notice from one of …
I hope this helps fill things in a bit.
Bob.
When one door closes, another opens.
-- Cervantes, Don Quixote
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Thank you very much Bob, this is comprehensive answer.
I think I could give it a try as I'd trade with 1-3 lots per signal (7-13 signals a day). I don't think anyone would consider it creating fake volume on ES.
I will contact my brokers for further explanation and Sierra if it's possible from technical side.
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This question has been asked many many times here and has been discussed ad infinitum. The wash trading discussion is off topic and in 99.999999% of cases not relevant to the question asked.
The real answer is why would you care? If one Algo is long and one Algo is short you are flat. You can be flat in one account, or long in one and short in another. The end result is the same. You don't make money or lose money when you are flat. Many people run multiple strategies on the same symbol in the same account.
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