Currency Arbitrage and Ways of Its Implementation on Forex
We all know the popular postulate of each trader: “the market has the property of repeating itself.” This postulate can be applied to the elements of analysis. The Dow Theory is still in a great demand and is still used today. The absolute majority of trailers and including me use the practical recommendations described in it.
Similar to the given practical recommendations, there are trading approaches in the financial market that have been working for several years and bring good interest rates to their fix api traders. Fix api arbitration can safely be referred to these systems.
Arbitrage is a type of trading strategy, the methodology of which is to open a pair of transactions (for purchase and sale) on the same stock exchanges for the same financial instrument. At a time when the price of the financial asset is an inherent time lag, where the value of the same asset may slightly differ, it is necessary to make two transactions simultaneously: a purchase at a cheaper price and a sale at a higher one. This exchange rate difference in the form of a spread will be your net profit, which was achieved absolutely without risks, because you do not care about which way the price will go further.
For a long time, arbitrage was used exclusively on the stock or commodity exchanges because the currency market does not imply a difference in the quotes. However, due to the appearance of a huge number of fix api forex brokers, this type of trading became available for this market, too. It’s all about the broker’s spreads and exchange rates, which causes the exchange rate difference between the different brokerage platforms (https://www.investopedia.com/terms/b/broker.asp ).
Of course, if we speak for the currency market, it is the most volatile and implementing the arbitration approach in a manual mode is an unrealistic task. While you want to make a fix api arbitrage deal, the price can significantly deviate and the arbitrage situation will be exhausted. To solve this problem, it is necessary to use auxiliary software, which will constantly analyze and, in case of arbitration, open at the time of the transaction.
The more the Internet technology is developed, the more algorithmic programs for implementation of fix api trading appeared. Thus, there are two different methods of currency arbitration today:
- Fix api Latency Arbitrage: this approach consists in the fact that the robot will monitor two completely different trading platforms. However, the trading operation itself is performed only in one broker. To do this, you need to determine which broker provides quotes more quickly, and which is slower. Proceeding from this logic, the trading operation should be made on the side of the slower one changing of the faster broker. Some robots trade by comparing quotes to a prime broker through fix api, which makes the algorithm more resilient to volatility and reduces the risks;
- Fix api 2-leg Arbitrage: this kind is similar to the previous one, but it differs in the fact that the transaction takes place immediately on two platforms. Thus, it does not matter what fix api forex broker delivers quotes more quickly, but which is slower. The main thing is the existence of an arbitration situation, in which multidirectional trading operations are carried out (http://forexzzz.com/product/forex-zzz-lock-arbitrage/ ).
Each kind has its advantages and disadvantages. However, the use of each of them guarantees receipt of passive income through the automation of the trading process. Moreover, taking into account the algorithm and logic of this principle, the formation of profitability from arbitration takes place with minimal possible risks or even with their total absence.