Caution when using hedge EAs and penalties from brokers ②
【Hedging trading
Some of you may have had a question pop up here.
「Sure, in separate accounts is one thing, but will inter-broker hedging be found out?」
In fact, FX brokers enforce this policy quite strictly, and since each company cooperates to check for suspicious trades, unfortunately it will definitely be detected.
If they disclosed all of the methods they use to check, traders would exploit gaps, so it is not openly stated, but it is said they employ measures such as the following.
・Trades conducted via MT5 or MT4 can be shared between brokers
・If the LP（*）providing pricing is the same, trading history can be shared from the server
・Tools that detect obvious high-leverage trading are shared
If a suspicious trade is detected, that trade is marked, and from the history shared to see if there are similar counter-trades, the account holder is identified and reviewed.
At that time, name, registered address, account opening date, deposit date, order time, server used, IP address, etc. are cross-checked, and if hedging is recognized, penalties such as account freezing are imposed.
Since they do not rely solely on the name, even hedging within family or groups can be easily exposed.
Hedging across brokers that may seem hard to detect actually involves various countermeasures,「Almost certainly hedging trades that violate the rules will be detected」so it’s best to avoid them.
※ what LP stands for
Liquidity Provider, the entities such as banks that supply price rates to FX brokers.
Generally, FX brokers obtain prices from multiple LPs to ensure market liquidity.
Prices may differ slightly among brokers because of this.
Representative LPs include “Bank of America,” “J.P. Morgan,” “NOMURA,” etc.
Heavy penalties for violations
FX brokers do not grant indulgence to violators.
Even at the suspicion stage,“acted in a way that aroused suspicion”can be subject to penalties.
Let’s look at the penalties for violations.
・Account freezing or forced closure
・Loss of profits and bonuses
・Withdrawal denial or login denial
・Blacklist listing
Even if you did not intend to hedge,“you have been judged as having violated the rules”and you may incur the penalties above.
In particular, losing profits is a life‑changing matter for traders, so avoid suspicious acts.
In fact, the author has also received penalties.
I opened accounts with two brokers and installed the same EA on both, to forward-trade the results between brokers.
One broker had a normal account where swaps were properly granted, running many EAs in a portfolio.
The other broker offered a swap-free account and used an EA that held many short positions.
This was to measure differences in performance caused by swaps in forward testing, to capture differences due to negative swaps.
For the first six months, nothing happened, but one day I received an email from the swap-free account broker with this content.
“Your trading has been judged as fraudulent trading that skillfully utilized swap-free features. Therefore, for this trade, you are required to pay the swap interest that would normally apply,
and, on your account, we will restrict the use of swap-free accounts in the future.”
We inform you.”(The original was much longer, but this has been greatly shortened.)
Right after USD/JPY first touched 150, there was a long decline period, so the normal account’s EA long-term trend and the swap-free account’s long-term short trend may have been judged as hedging between accounts. (The broker should be able to recognize that it is an EA-driven trading, though…)
I explained the reason, but there was no response, and the next day the two weeks of negative swap for the short positions was suddenly reflected in the position profit/loss.
In other words“No grace period or chance to explain! Suspicious trades will be punished!”This is what happened.
Since then, I could no longer use swap-free accounts at all… It was a relief that profits were not frozen, but withdrawals took about a week this time, whereas they usually were processed the same day.
Everyone should be careful.
When running EAs on several accounts, assembling a similar portfolio could be one way to avoid penalties.