Trading against a loser flow

Quoted from Forex.com.bd-Editorial External answer — Quantitative Finance Stack Exchange Author: Lliane Source score (net votes, not local likes): 2 Original post: https://quant.stackexchange.com/a/43701 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. There are a couple constraints : It is true that the majority of traders are losers, but that's after fees. You need to find losers who are statistically losing more than just the fees (because you're going to pay the same), fees can be a sizable share of the losses in the long term. There is no reason to think that the subset of order flow you isolate is any different from random noise, just like Attack68 mentionned above. Then even if you manage to find a statistically significant edge, you become dependent on the sizing of those clients, if you assume for instance that the average retail loser is just a guy averaging down on leverage until he busts, the opposite strategy is a CTA momentum/trend following, you'll need to be confident with the sizing that comes with it (reversals will hurt). It's been mentionned that banks do that against their FX customers, but the way they get paid is on the spread on their order flow, not because they think their customer is wrong (it might also be because they manipulate the fixing, but that's not legal and anyway that's not something you can do).

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