Quote from: bitfoo on September 16, 2011, 08:24:27 AM

Quote from: FXTrader on September 15, 2011, 12:01:51 AM

2. The mimic part is run through a program created by a prominent developer in the bitcoin community. Basically the software gets an account balance of all the individuals who are participating in the program and lets me know how much bitcoin or USD I'm trading. When I enter a trade, it divides the quantity I am trading out to all the accounts which are participating based on a percentage ownership.

Example - I have 3 customers. Two customers have 10 bitcoin, and one has 100 bitcoin for a total of 120 bitcoin under management. I enter a trade to sell 60 bitcoin. The first two customers with 10 bitcoin each have an 8.33% stake while the large customer has an 83.33% stake. My order is divided proportionately so the two customers each sell 5 bitcoin while the larger customer sells 50 bitcoin. The percent gain or loss I make on this trade will be mimicked across every account.

Another question. If the amount you control across all accounts starts to become fairly large, the gains/losses experienced by each account will start showing differences, since you can't enter and exit the market at exactly the same price on all accounts (buying driving the price up, for example). Accounts where the order is placed first may have the advantage. How do you distribute this gain/loss across customers?

My way of mitigating liquidity risk:
1. My orders are broken among all the accounts. If I say sell 1,000 bitcoin, every account will sell their share of the bitcoin depending on their share of the overall master account.
2. Depth of market: I utilize the current depth of market to avoid price spikes and slippage. If I sell 1,000 I ensure that there is sufficient liquidity to absorb my trade.