The characteristics of different types of the arbitrage trade

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The characteristics of different types of the arbitrage trade

Category : Software , Strategy

Exchange speculators are looking for a stable and profitable trade every day. The methods are changing, the strategies – optimizing and new methods of money management are developing continuously. The fix api traders are analyzing and sorting out a lot of information, searching for the Holy Grail. Today I am going to help you to identify a stable tool for profitable trading and review it in detail. I will consider the arbitration form of trade that you had might heard of before and that I have mentioned in my recent publications.

The arbitrage trading attracts more and more traders’ attention. Let’s investigate why it is so. The first type of trading allows trading with a zero risk parameter. It is an ideal choice of strategy for those, who want to save their capital and multiply it. After all, most investors are interested in the risk of trading, and only then profitability. Arbitration, in turn, allows you to achieve this goal.

The arbitrage trading attracts more and more traders’ attention. Why is it so? The reason is that this trading type allows trading with a zero risk parameter. It is a perfect strategy option for those, who want to save their funds first and then multiply it. Most of the investors are interested in the trading risk and then the profit. Arbitrage allows you to achieve this goal.

The main idea of the fix api arbitrage lies in the committing exchange operations based on exchange rate differences for the same financial activities at the different trading platforms. It means that when the price is different at the same exchange or at the same broker the trader can make transactions based on these deviations and fixate the positions when the same values are reached.

Thus, there would be a small loss with one operation but a profit with the other. The profit would exceed the loss by 2-3 points. Due to this, the breakeven of trading algorithms which trade according to the arbitration principles is formed,

The information technologies development has provoked the emergence of various types of arbitrage trading, which are implemented by the automated programs – trading robots.

According to this, the two key types of trading robots can be distinguished:

  • Fix api Latency Arbitrage
  • Fix api 2-leg Arbitrage

Fix api Latency Arbitrage

This arbitrage trading type is based on the committing speculative positions via comparing the price quotes between the faster and the slower fix api forex brokerage companies. The algorithm connects to the two trading accounts, which are often the prime one, and the ordinary one. The prime one is a fast quotation provider, while the slow one delivers quotes slower. Therefore, the robot opens trading operations on the “slow” broker’s account towards faster data, when the “slow” broker’s quotes deviate from the values of the faster one. For instance, if the price for EURUSD currency pair is 1.1720 at the “fast” and 1.1750 at the “slow” broker, you need to open a sale with a range of 20-30 points of profit.

Fix api 2-leg Arbitrage

On the other hand, this arbitrage type allows committing not only one, but two trading deals. The method is similar to the first type: two exchange sites are analyzed and the deals are opened in the case of exchange rate discrepancies. IN order to understand the essence of this particular arbitrage methodology, let’s take a look at the example, mentioned above. So, the EURUSD currency pair costs 1.1720 at the first broker and 1.1750 at the second one. We don’t mind which is the “fast” and which – the “slow one. The algorithm opens the purchase for 1.1720 and a sale for 1.1750. So, there is an informal lock. However, the deals are opened only when the maximum range of discrepancies is reached (let it be 30 points) and locked when, for instance, 15 points are reached. It means that the robot would close the deal when the difference between quotations would be 15 points. If the price at the first one would be 1.1745 later and 1.1760 at the second one, then the deals would be closed. The result of the first one would be +25 points, while for the second one it would be -10 points. It equals 15 points in the net profit.

Each of these arbitrage trading types is a universal tool for the risk-free trading. As you can see, the whole result from a trading is created by the number of such operations. They are quite easy to implement with the help of trading robots.



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