Arbitrage as a kind of speculative trading

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Arbitrage as a kind of speculative trading

Category : Robots

Speculative trading every year attracts more and more new players, because in the short term speculation they are able to demonstrate a greater profit potential than investment transactions. But everyone forgets about a simple logic: each kind of speculative trading consists in a correct distribution of risks and a proper capital management. However, this combination is not obtained by every fix api trader. Most stock speculators want quick and easy money without realizing that the market does not allow it. It is because of such chaotic decisions and blind faith the statistics are formed, in which almost 90% of the market players lose their funds.

I want to note the fact that I think speculation is the basis for the market movement and that huge amounts of money are being made on them. But newcomers who are only getting acquainted with the market are not able to correctly analyze the situation and enter the market. For speculation, it is necessary to enter the market correctly. Thus, at the right time, enter and exit the transaction. And if you just get acquainted with the market and do not understand the basic principles of its movement, then you will have a loss with a probability of 90% (which is again indicated by the statistics).

If you choose speculation as a source of earnings from the fix api forex market, then I highly recommend you to use auxiliary algorithms. Fortunately, we live in the era of information technology, in which you can automate every process including the fix api trading. If we consider algorithmic strategies for speculative trading, then I would single out the arbitrage method of trade.

Arbitrage is a type of speculative trading, which is based on a paired analysis of the same financial asset, but on different brokerage platforms ( ). To put it simply, fix api arbitration allows you to analyze the same asset for the presence of exchange rate differences or delays, in order to open a short-term transaction. The very logic of the work is not new, but it is only recently used in the currency market. In order to understand the logic of work in more details, I propose you to consider a specific example:

The value of the EURUSD currency pair in one broker is 1.1630, and in the second one – 1.1620. Thus, there is a discrepancy in the size moment of 10 points, with the fact that the normative value equals 5 points. The trading robot ( ) or the auxiliary algorithm sees this discrepancy and makes two transactions: to buy at the price of 1.1620 (on the trading account in the first broker) and a sale at a price of 1.1630 (on the trading account of the second broker). When the price reaches a standard deviation (5 points), the robot will simultaneously close both transactions. Let the price was 1.1667 and 1.1662 respectively. Thus, the trader will receive a 37 points of loss on the first account and a profit of 42 points on the account of the second broker. The overall financial result is equal to 5 points of net profit.

This kind of speculative trading has a number of advantages:

  1. Minimal risk with high yield potential: due to the fact that the robot will trade with the minimum retention time, the trader will be able to make multiple positions with a profit of several points. But if you take into account the number of transactions per day (about 20-30), then you get an excellent percentage of return on a monthly basis.
  2. Automatic trading: it allows you not to waste time analyzing the asset and generate a passive source of profitability.
  3. Ability to select the key parameters for trading: setting up the necessary functionality and the method of work of the trading robot will enable allow more flexible management of the risk/yield parameter.

Arbitrage trading as a kind of speculative trading is perhaps the best option both for getting to know the market and for forming a high and stable percentage of profitability in the financial market.

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