Must a broker be so unclear...?

Here’s a copy and paste of the chat I had with Oanda about their scalping policy. I’m testing scalping the markets and just wanted to see what they had to say policy-wise; read on:

OANDA: Hello. How may I assist you?

xxxx: Hi. What is Oanda’s policy on scalping?

OANDA: The term scalping here primarily refers to latency trading, where clients unfairly exploit, to their advantage, delays that may occur due to the fact that FXTrade is Internet-based.

OANDA: On the rare occasions when we have believed a customer has been trading in this manner, we try to contact them and ask them to stop. Usually this is effective, but in the few cases this has not been effective, we start to reverse the trades that were executed unfairly. If necessary, we also close the account.

xxxx: How long does a trade need to be active for it to be not considered a scalp?
OANDA: You can open trades for a short period of time, it is allowed

xxxx: Okay, I’m still unsure of the explanation you gave about exploiting because of an internet delay? Could you explain more?

OANDA: There are no specific time restrictions on the trade’s life span, but if you exploit the internet connectivity delay for your advantage, it is considered as a scalping. If you want to open and close trades for a short period of time, it is possible

xxxx: Could you give an example of how the exploit is used? Because if price is simple shown on the screen and I feel I’d like to close, I don’t know how the delay is affecting me adversly or whether closing the trade would get me in trouble.

OANDA: Yes, if price is simply shown on the screen and you feel like to close the trade - it is allowed. The scalping is unfairly exploitation of the Internet and its delays

OANDA: Is there anything else I can help you with?

xxxx: Nope I think that is okay. Thank you.

Now after all that, HOW does one exploit because of the price lagging. I can’t get my head around it because if I am only shown a number on my screen, I have no idea whether it is lagging or not. Thus if I close a trade, how do I know whether I am ‘exploiting’ their system?

Anyone have a clearer explanation than what Oanda had to say?

This is just a guess, but I think the sort of thing they are talking about is more for those trading via their API in a manner like flash trading - basically beating the quote to the platform. I think so long as you are trading through the platform you are probably fine.

if you was to use several diferent brokers you will often find some quotes get relayed a split second before others, using this to your advantage is classed as exploitation and scalping the market, this causes the broker to lose a lot of money hence the reason it is not allowed, however if you rely solely on one brokers quotes this shouldnt effect you

lee :slight_smile:

AH okay that clears it up. Why can’t tech support just state that from the start. I guess they’d rather not plant the idea in others’ heads if they’d never known it.

Thanks guys!

this can also be refered to as price arbitrage

lee

Arbitrage is something different.

The simultaneous purchase and sale of an asset in order to profit from a difference in the price. It is a trade that profits by exploiting price differences of identical or similar financial instruments, on different markets

(investopedia)

If you could buy eur/usd on Onada and sell it on FXCM you could have an arbitrage situation. A triangle arbitrage is a little different but the brokers software should prevent that from happening.

This has more to do with Onada’s platform being slow. That is watching a faster price feed and putting in orders for moves that are not happening yet on Onada’s trading platform. I think that’s what the rep was trying not to describe.

Doesn’t that mean a broker can just SAY im doing it and cancel my account then? If they feel I’m taking advantage of them because there’s no way they can know if someone is watching a different price feed.

Kinda makes me scared of having too many winning trades in a row then :stuck_out_tongue: if that ever happens :rolleyes: