Arbitration strategy: is it really applicable in the market?
Category : Strategy
I recently surfed the Internet in search of an automatic fibo net, which would count the number of bars I needed and put the mark between high and low level in this range. It would seem, what could be simpler than this script? However, I spent a considerable time and, without realizing it, switched to arbitration. No logic or communication, but I was interested in the very principle of working on Forex, and at the MQL forum I sat almost half my day. After all, how to trade arbitrage on the spot or the stock market is understandable. And how to do it on Forex? Are there already methods that help to conduct arbitrage fix api trading? It turns out that there are, and today I want to share them with you.
For those who have not heard of arbitrage trading I will point that this type of trade concludes of speculation of financial assets based on exchange rate differences in their price. For example, when the price of the same asset is slightly different on different stock exchanges, or a single broker quotes arrive with a small delay, while the other broker displays the current prices. More detailed information on arbitrage fix api trading can be found on Wikipedia – https://en.wikipedia.org/wiki/Arbitrage.
To make an arbitration deal on the fix api forex market, the second method is needed (the exchange of difference between broker companies). And I think it’s not hard to guess that for this method you need software. After all, if it’s forex, then it’s worth noting that this is the most liquid and volatile market, so it’s almost impossible to make arbitrage transactions in a “manual” mode.
What software is needed for the arbitration strategy?
Here everything is very simple. The trading robot is put on accounts in different brokerage companies or on different standard accounts. But at once there is a difficulty in our conditions. This is the synchronization of the two robots in different accounts. In the market, at least in MQL, I did not find a ready solution and therefore began looking for it on external sources. So, I came across a software that solves the problem of synchronization, because both accounts are pulled into the program and all arbitrage transactions can be made through this software – http://www.forexzzz.com/product/forex-zzz-lock-arbitrage/.
Algorithm of arbitrage trading
The most optimal condition for trading is the use of prime brokers in the quality of a “faster” broker that has actual quotes. For the “slower” fix api forex broker can be put exactly the broker, in which you have an account. Then, when the exchange rate difference between quotations exceeds a certain set value, the robot will sell the asset, where the quotes are higher and buy where they are lower.
Let’s look at an example
The value of the EURUSD currency pair for a fast broker is 1.0852, while for a slow broker the same asset has a value of 1.0848. The condition for opening a deal is a difference of 4 points. And as we see, the condition is met: the difference is just 4 points. If the value of the second broker was 1.0849, the deal would not have been opened. Returning to the algorithm, the robot will decide to sell at the first broker to 1.0852 and buy from the second to 1.0848. Thus, when the difference returns to the normative values of 1-2 points, the robot will fix the profit. As we see, the risk in this arbitrage strategy simply does not exist, because there is always a minimum level of positive transactions. This does not mean that there will not be unprofitable operations. If the cost of the same EURUSD is 1.0862 for the first and 1.0861 for the second broker, the overall result will be -10 points for the first transaction and +13 points for the second.
Without waiting for it, I found an excellent algorithm that will help to optimize trading and become an additional kind of my trade. Still, the development of information technology allowed creating a previously inaccessible strategy for the fix api forex market.