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Arbitrage trading on Forex

The essence of arbitrage trading is to determine the moments when the quotes of one forex broker outstrip the quotation of the second in time.

08.Mar.18 6:08 AM


Arbitrage trading on Forex

Arbitrage forex trading is a relatively new trend in the e-commerce market, which, nevertheless, allows us to derive decent profits from the technical imperfection of equipment and the human factor of the employees of the dealing centers. As is known to any trading / planning trade, any broker that provides terminals for trading itself buys quotes from one of the suppliers and only then translates them into its system. In this case, there can be delays both with the transfer of the signal from the supplier of quotations to the forex broker, and from the broker to the terminal, it is these delays that help us in making a profit.

The essence of arbitrage trading is to determine the moments when the quotes of one forex broker outstrip the quotation of the second in time. In this situation, two options are possible:

1. The opening of the position towards the movement of the price at a slower terminal, as soon as the price difference reaches the spread (sometimes, in order to avoid the requotes, the opening occurs when the difference is 2/3 spread) and closing it in the opposite situation. This type of trading is called "one-legged", as trade relies on one terminal "foot." As a second support, a statistical sample of completed transactions is used, against which the profitability is calculated.

2. Opening positions in both terminals in opposite directions and closing when receiving a specified number of profit items. This type of trade is called "biped", that is, the profit is as if on two legs and is formed by both terminals.

At first glance, there is nothing complicated, but with the active movement of the market, such fluctuations can occur very quickly, and also compensated by the broker, because they are not interested in making customers profit from their account, therefore, a specially configured adviser is used for this type of trade.

In addition, it is necessary to first trace the price mapping ratio in the terminals of different dealing centers, since arbitrage trading is available at a certain minimum delay that the program will be able to catch. To do this, a list of all brokers with less than the same indicators (spread, speed of execution of orders,) and acceptable conditions for trade (minimum deposit, the presence of cent accounts, etc.) is created. Then, between these brokers we perform comparative testing, for this we download terminals from all the terminals selected at the first stage of the brokers, and run them simultaneously on the same currency pair (EUR \ USD), with one time interval (H1) and track the rate of change of the exchange rate.

As a result, there should remain only 2 terminals in which the most clearly visible price delay and in which it will accurately follow a faster schedule. Here on this pair we begin arbitrage trading on the system. To know more on the implementation of arbitrage strategies on forex, see this site.

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