There are a number of things you should know about the kinds of setups that come with our Lock Arbitrage software if you’d like to use it to conceal your arbitrage trades from brokers.
The original setup (pic.1) that we recommended for our VIP FIX Lock Arbitrage software entailed using two accounts with different liquidity providers. There was no need for an IP changer.
The user could have one FIX API account with one liquidity provider and a second FIX API account with a different liquidity provider; the two accounts would be subsequently locked. While this setup worked very well in the past and continues to work with some brokers, the use of this setup is now becoming problematic. Among the issues that have come up, the most important one has to do with account longevity.
FIX API accounts that use arbitrage trading no longer last as long as they used to. This is due to the relative ease with which brokers and liquidity providers can now identify accounts that engage in arbitrage trading. Once these accounts are identified, trading in the offending account will then be obstructed. In a word, if you continue using this setup, the broker will eventually catch on to what you’re doing by reviewing all the orders that have taken place during arbitrage situations and start interfering with your trading. Liquidity providers will especially resist this kind of trading if they are market makers. If all of your trades are toxic, your trading terms will be changed. To avoid that, you’ll need to dilute your toxic flow with non-toxic trades.
One way to address this problem involves the use of an IP changer. An IP changer allows you to have two accounts at the same liquidity provider; (pic.2) however, both will be under different names in order to make it impossible for the liquidity provider to determine that your orders are originating from the same IP. Additional information about using an IP changer is available on our website.
We’ve developed a more sophisticated way to overcome the problem – namely, by using a FIX API splitter. As the splitter costs some $1,500, this might be onerous if your account size is modest (e.g., no more than $500-600). Even so, a FIX API splitter is still a good investment (of course, if your trading capital is $5,000-6,000, a FIX API splitter is a very good idea). The splitter helps you add non-toxic orders to your trading flow. As the name of the program suggests, this is done by splitting your accounts. Let’s suppose you have two FIX API accounts. (Pic.3)
This means you have two external accounts. The splitter can then use these two external accounts to create internal accounts that will be connected through the external account. You can create as many internal accounts as you want. There are no limits on the number of internal accounts that can be created, and there are also no limits on the number of external accounts that you can have. A single FIX API Splitter license is all you need in order to install the splitter on a VPS, connect several external accounts to it, and then split the external accounts into as many internal accounts as necessary.
The purpose of a FIX API splitter is to address one of the limitations associated with FIX API: the protocol does not allow you to connect two different programs to a single FIX API account. A FIX API splitter overcomes this limitation by breaking up a single account into several internal accounts; each of the internal accounts is subsequently linked to the right program. As a result, you can use the Lock Arbitrage software to send toxic trades; your other programs will send non-toxic ones, e.g., with the help of expert advisors (EAs).
You can use your own EAs, or you can choose the EAs that we offer our clients. Bear in mind that if you’re using expert advisors that are adapted to FIX API Trader as well as those that are not, you will need two different programs.
Also, our Lock Arbitrage software contains built-in strategies that we offer for a fee as part of Lock Arbitrage FIX API. These strategies also help create non-toxic flow.
If you happen to trade CFDs, you will need non-toxic strategies designed specifically for CFDs. This is because liquidity providers tend to farm out orders to other, higher-level liquidity providers; in the vast majority of all such cases, different liquidity providers are used for forex and CFD trades. In other words, your non-toxic forex orders might be sent to one broker, while your non-toxic CFD orders might be sent to another broker. In order to mask your trading activity, you’ll therefore need a forex strategy for your forex trades and a CFD strategy for your CFD trades. We have developed an expert advisor specifically for that purpose. This EA trades CFDs based on the non-toxic method, and it can be used with MT4 Lock Arbitrage as well as with FIX API Trader.
Things are different in an MT4 environment. There are several setups that are possible. Unlike with FIX API, you don’t need a FIX API splitter with MT4, since there are no limitations such as you get with FIX API. One older setup involves the use of different brokers for your accounts, in which case no IP changer is needed, as the IP address can be the same. (Pic.4) However, if you have one server but two different accounts, you will need a different setup – one that uses an IP changer to change the address so that the broker sees two different IPs for the two accounts. (Pic. 5)
Note: we strongly recommend that you avoid logging into your account from the same IP address to check your account balance or perform some other function, regardless of whether you use a mobile device or a VPS. If it’s absolutely necessary to do so, we suggest using the investor’s password. Still, even that is undesirable. The broker’s server logs the IPs for all login activity; if your trading originates from different addresses, but you check your account balance from the same IP address, your broker might realize that something isn’t right.
With VIP MT4 Lock Arbitrage, there are two ways to generate non-toxic flow. You can use our built-in forex strategies that can be activated for you for an additional fee, and these strategies will then create non-toxic flow. (Pic.6) Alternatively, you can use your own EAs.
You can also buy some signals and then use them with small lots to submit orders to the MT4 terminal to generate non-toxic activity with that broker and mix it with your toxic flow. For forex trading, you’ll need forex-based strategies; and we offer those. We also have a new expert advisor that will create non-toxic flow for several CFD pairs if you trade CFDs. You will need to install the advisor on Terminal 1 for Account 1 and on Terminal 2 for Account 2. If you’re using different brokers, the entire setup can be done on the same VPS. If the broker is the same but the accounts are different, you’ll need a splitter and two VPSs. One VPS will be needed for the arbitrage program, which will be connected to Account 1; the other VPS (VPS 2) will handle the FIX API splitter that will in turn connect to Account 2 and Terminal 2. Naturally, Terminal 1 will be connected to VPS 1. You then link your EAs – or our EAs, if you bought them from us – to both terminals and start generating non-toxic flow.
Our advanced setups will certainly improve your account longevity and let you trade using the same accounts for longer periods of time. You won’t need to worry about the broker flagging your accounts or changing your trading terms to modify the trading environment in a way that is detrimental to you.