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Rigged MarketMaker CFDs

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Duffenator

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21 November 2008
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Lots of people who trade CFD's think that when they are taken out of the market by a stop and then the trend proceeds in the original direction, that the CFD provider has sort our their stops. I have suffered the same inconvenience, but have since adjusted my technique. I believe that most of the time it is nothing more sinister than an educated trader knowing where the stops are likely to have been set by us plebs, and taking advantage of it.

It is bad for us, but I take my hats off to these people as they possess a very useful skill.

HOWEVER- today, when trading the AUS200 cash cfd, I saw something to lead me to believe otherwise. Now, before I go on, I am happy for someone to prove me wrong on this - in fact I would be stoked!

I believe this to be a bit of rigging by my marketmaker because I also watch the actual SPI contract. If you look below, the chart on the left is the CFD and the right is the SPI. You can see that the price drops away rapidly, before it starts to consolidate. And it is in this consolidation that I believe the rigging occurred. You can see that at no stage does the price of the SPI rise much above 3530. 3530 is a level equivalent to 3520 on my CFD chart. However, if you look at the CFD chart, the price rises significantly above 3520! I should also say that the green candle soon retraced and moved back below 3520 after the screenshot was taken!

Can anyone suggest a reason for this difference in price move? Could there have been a large spread in the bid/ask price of the SPI at this point?
 

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My experience with the Aus200 index CFD was that it had no basis for the movements, relative to the SPI.

I came to the conclusion it was very difficult to trade. It seemed wherever I placed my stop/sell order, the Index would act like a magnet until it triggered, knocking you out of the trade with a loss.

Also, the more quantity you purchased, or doubling down to average down, the more of a target you seemed to be for the marketmaker. The marketmaker put you in so much pain you just had to get out, then, it would turn around and move back towards the SPI.

At the end of the day/beginning/overnight it would usually reach parity with the SPI.

The best way it seemed to trade the Aus200 was to trade the opposite direction to the trend. So, if you thought the trend was Long, everyone else usaully did as well, therefore, by placing a short, you had a better chance at profit while the marketmaker tried to squeeze out the Longs.

To me it was a game, that usually ended up in a loss. This may not make sence to those who have not traded the AUS cfd, but this is my experience, and the only way I would play this cfd is either as a hedge, or on a longer term view disregarding short term movements.
 
I have to say I haven't found it as difficult as that Gundini...but that being said, I know that feeling.

Until this point I have been relatively neutral about whether marketmakers seek out stops or other "untowardly" practices. However, in this instance, with this provider, I can see no reason for the spike. I even started up a demo account with IG and had a look at their 1min data - It doesn't show the spike in price that I got with my provider!

TH - you have asked for proof of marketmarket makers rigging price action...I think this may be it. But as I said in my first post - I would like to be proved wrong....
 
skc said:
May be try GoMarkets. Sounds like they use real numbers.
Click to expand...

I am leaning more and more towards trading SPI directly...

The aus200 cash CFD, with my provider is based on "fair value". I have asked them what this means and was told it is affected by various factors - including time. Time? how does this affect price? maybe we should all add indicators to our charts showing the change in price over time...oh hang on a min - isn't that called a price chart?

Anyways, I have asked for the formula they use for calculating price and I will be getting a call from their deal desk. No doubt to give me the run around...but if anyone is interested in knowing how price is calculated on an index CFD - might be worth your while staying tuned to this thread! And if your not interested in that, might be worth a laugh at all us CFD index traders!
 
when i've paper traded the index cfd i've been surprised how rountinely my paper stop has been hit.

2 conclusions came from this experiment:

1] i need to improve my entry
2] that's just intraday index trading


the cynic in me would like to think MMs may be up no good, but these days i think its more a reflection of my trading skill
 
Duffenator,

There is nothing new here as much as some would like to palm it off as "poor trading techniques, poor psychological planning, " etc.

This happens quite often. Some would say 'why would they bother'? Well simple, 'a lot of a little makes a lot'. Many have become very wealthy through this simple rule. If have a dozen small stops were taken out with various clients throughout the day, they have their wages, just like any employee or business. They simply don't just earn from spreads.

I am sure TH with have plenty to say here.
 

Hi Duff Could be an arbitrage op if you have quick enough fingers Name of Provider please?
 
James Austin said:
the cynic in me would like to think MMs may be up no good, but these days i think its more a reflection of my trading skill
Click to expand...

I agree - I used to think the same thing. But I found it was just in my head. I would remember the bad, i.e, when I was stopped out before a potentially good profit. However, I would forget the times where I was within a point of being stopped out, but wasn't, before making a good profit. Once I quantified this, I no longer had any worries.

Until today, I had nothing that seemed to provide solid evidence of what a lot of us suspect. However, the thing with this instance, is that I can find no reason in the underlying price for this spike. It wasn't there in the SPI, it wasn't there on IGs 1 min chart.

Furthermore, the level of the price spike was pretty much the only opportunity anyone would have had to short on the earlier downward leg because the price move was extremely fast.

I know it is nothing new, but I remember reading in another thread, that someone wanted some proof of dodgy moves in market maker cfds...and as far as I can tell, this could be it!

Cartman - it is GFT. good luck, its something I'm going to have a look at!
 

duff,
MMs "may" fish for stops, but i dont think so. And what you've got is just one example, not enough proof

better evidence would be futures/cash discepancies right across the chart, or across a period of time, afterall there are stops everywhere that are worth seeking out
 
My biggest question as to if MM actually hunt stops would be "Why my stop?"

Theoretically, people have stops all over the place so why would they just hunt yours, or those that trade in a similar style? It just seems a bit paranoid to me
 
They operate off the spreads, not the last price.

I think we've been through this all before...
 

Maybe he scalps to beat them at their own game.

I have no doubt stops are hunted but for the life of me can never understand why little `ol me.

The most blatant was when I moved my take profit stop away 3 times and it kept coming.After third move I stayed and market went over by one pip (got records to show) and dropped over 800 pips over weeks after that.I just had to be squeezed out and THAT my friends is what I have experienced.

Bucket shops are for newbie suckers (like me) before they wisen up to better service providers and methods of trading.

cogs said:
There is nothing new here as much as some would like to palm it off as "poor trading techniques, poor psychological planning, " etc.
Click to expand...

Answer ...


Try an ECN ...

 
James Austin said:
duff,
MMs "may" fish for stops, but i dont think so. And what you've got is just one example, not enough proof
Click to expand...

true, one example is not proof...but, what it shows is that the price was "significantly" different on the marketmaker compared to the SPI which it is based in at least one instance.
 

Thanks Duff Dont have an acc with them so cant comment on specifics If the price moved real quick most cfd mobs wont let you on even if you have superman fingers so pointless really Your chart does look to have an anomaly though
 
Duffenator said:
true, one example is not proof...but, what it shows is that the price was "significantly" different on the marketmaker compared to the SPI which it is based in at least one instance.
Click to expand...

There is actually no need to prove anything. The moment you sign up to a MM you have decided that they can screw you however they want. This is a clause from one provider's PDS. Check your provider and chances are they have similar provisions.

3.19 Clients may be treated differently

CMC Markets in its absolute discretion may quote different prices, and charge Commission, Financing Charges, Rollover Charges and other charges at different rates, to different clients.
 
Guess I should also say that I was already out of the trade, so I had made my profit, and that this isn't a case of me being "just" stopped out and feeling bitter at the world.
 
Cartman said:
Thanks Duff Dont have an acc with them so cant comment on specifics If the price moved real quick most cfd mobs wont let you on even if you have superman fingers so pointless really
Click to expand...

...and as I have found GFT loves to re-quote...it even re-quotes it's re-quotes!

SKC - I have read that also. And yes it is in the PDS of GFT - I actually asked them about that the other day and was told they are referring to better brokerage etc if you are a large client...I laughed on the inside and thought "yeah right".


If a marketmaker can just move the price around - I think that the ATO should class trading CFD's as gambling and not take half our profit....but that is a totally different subject and will derail any discussion - so forget I said that! lol
 
Duffenator said:
If a marketmaker can just move the price around - I think that the ATO should class trading CFD's as gambling and not take half our profit....but that is a totally different subject and will derail any discussion - so forget I said that! lol
Click to expand...

They do, hence why no CGT on CFD profits.

Do a search for the topic
 
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