TheEconomist's Forex Arbitrage Blog

Hi, I am really interested in your findings. I read Michel forum about FPI, similar to your Intercross Arbitrage. Some people claim is very difficult to trade with forex brokers and mantain the pairs. Your conclusion I think is very straighforward: very difficult to implement. What happens if you consider quotes from differents brokers and trading in different accounts?

Also, I have been trading forex with interactive brokers and a couple of different banks quote in IDEALPRO platform.

Thanks for posting your arbitrage strategies!

My email is emarco@fibertel.com.ar if you wish to contact me privately.

Thanks

 

Juan

Hi, I am really interested in your findings. I read Michel forum about FPI, similar to your Intercross Arbitrage. Some people claim is very difficult to trade with forex brokers and mantain the pairs. Your conclusion I think is very straighforward: very difficult to implement. What happens if you consider quotes from differents brokers and trading in different accounts?

Also, I have been trading forex with interactive brokers and a couple of different banks quote in IDEALPRO platform.

Thanks for posting your arbitrage strategies!

My email is emarco@fibertel.com.ar if you wish to contact me privately.

Thanks

 

Juan

 

Hi there,

Interesting username...reminds me "Wall Street"'s Gordon Gecko...

FPI is the root of my strategy, I just modified the perception over it. As about trading different accounts, I'd give it a NO... You can't arbitrage if you don't have the accounts unified somehow. Even if you find a way to control trading , open and close trades simultaneously , you still need to wire the money from the winner to the loser, and this means fees. And even if you find that forex transfer provider that's mentioned somewhere on the GoldenMoneyTree forum, this is still gonna be done by hand. So I'd stick with Interactive Brokers and that IDEALPRO if I were you. Did you check that Reuters/CME platform link on the last page of FPI thread?

 

Hope to find you around later, I will soon start posting the other strategies, as the forex landscape is changing and brokers hungryness for clients is opening arbitrage doors...

Juan

 

Hi there,

Interesting username...reminds me "Wall Street"'s Gordon Gecko...

FPI is the root of my strategy, I just modified the perception over it. As about trading different accounts, I'd give it a NO... You can't arbitrage if you don't have the accounts unified somehow. Even if you find a way to control trading , open and close trades simultaneously , you still need to wire the money from the winner to the loser, and this means fees. And even if you find that forex transfer provider that's mentioned somewhere on the GoldenMoneyTree forum, this is still gonna be done by hand. So I'd stick with Interactive Brokers and that IDEALPRO if I were you. Did you check that Reuters/CME platform link on the last page of FPI thread?

 

Hope to find you around later, I will soon start posting the other strategies, as the forex landscape is changing and brokers hungryness for clients is opening arbitrage doors...

 

Hi,

 

Yes the username is related to Gordon.....

I could not find the Reuters/CME platform link, ca you provide it to me. What's the advantages of this platform?

 

Have you tried to implement FPI strategy and have you profited from it? If yes, is it worth to pursue?

In your post you mention that it lacks:

 

i) precise FPI calculation method,

ii) link between FPI swing and results

iii)Embedded of spreads costs.

 

What makes Forex Arbitrage much more interesting than FPI?

What advatages I have compared to FPI?

Have you profited from Forex Arbitrage strategy?

As I read your Arbitrage explanation you point out that it is vital to use microlots or minlots?

"Without microlots, risks can be brought down from $5000 in account equity? Sorry, that?s it."

Sorry I do not understand what you said..Can you expalin me?

 

Which broker do you recommend for FPI and Foex Arbitrage?

 

Would you mind explaining the other arbitrage posibilities : Oil Arbitrage, Cash/futures arbitrage, etc?

 

I would like to contact you by Skype (my id juangecko) if you want

Best Regards

 

Juan (from Argentina)

Hi there,

 

Well, there is no download link on their website. They are on the "God" level, and have access to real market quotes from several providers. Their platforms are never available for download. You gotta have a lot of cash available, it works by mail contact, its not as easy as a "download our trading platform and trade in minutes". As for the FPI, I didn't test it directly. I made an EA at that time (FPITrader), I think it is still available for download on the forum (and I recommend that you look upon it, it was a hard piece of code at that time). It has several bugs, and I was able to correct them with the indications that I've got on forum. However, in one of the days that I was calculating swaps I realised the FPITrader had a systhemic error. It was not hedged. Michal told us about the Buy-Sell-Sell and Sell-Buy-Buy rings. Given his examples of FPI calculation, I made a math checker of the FPI formulas, which is embedded in FPITrader. I set the criteria for each currency to be, one time at the numerator and one time at denominator. Once this condition was accomplished their product was to give me the FPI. However, it didn't check the hedge criteria, so that EVERY CURRENCY TO BE EQUALLY BOUGHT AND EQUALLY SOLD. When I realised this, I sent FPI to the trashcan (only its math side) and then I came up with the Intercross idea. Even the Potential, Required and Costs have been added more than a month later after I implemented it in MetaTrader and Coder from the forum took some parts from my data (already made crosslists) and made implementations of it on EFX and later on InteractiveBrokers. He was actually hoping for a "currency aggregation" on these brokers in order to do real triangular-style arbitrage with it... He still says that EFX has too great slippage, but I've seen problems on MetaTrader brokers too...

Now, to answer your other questions:

i) precise FPI calculation method: for every possible ring, there is a different FPI calculation method (this without me mentioning that every ring has two FPIs, like my virtual bids and asks)

ii, iii) Michal always teached us to trade FPI swings. However, this was supposed to make profit in almost lab conditions : "impeccable hedge" and no slippage , which are very far from real market conditions or even worse, MT4 brokers conditions... So profit was a result of the FPI swing, and just it: no other calculations of costs and possible results (I think the real result of Intercross is the difference of potential on close and its realtime costs at that time; the virtual bid - virtual ask difference is more a pale reflection of what should be the final result; it should show you that X difference on virtuals means Y potential and closing at a similar Y potential will get you a profit of Y - Costs).

Intercross Arbitrage is not necesarilly more interesting than FPI. It's another view on the same strategy, the difference is the one from a flashlight to a projector: at least it helps not trading blind FPI swings. I didn't have the cash to trade and frankly I don't like it too much; there are other arbitrage strategies, and I will post the Swap Arbitrage in a few days; If I'd have cash I'd trade either Oil arbitrage or Cash-to-futures arbitrage in conditions of swap free account;

Now about microlots: If you're poor, it's vital to use microlots; if you're loaded with cash, it would be no difference.

Michal himself pointed on several pages to use Neoticker or EFX, in order to avoid MetaTrader's lots. It's obvious why, and I demonstrated it by my calculus. One thing is to be unhedged with a few hundred units per contract, that move less than 10 cents/pip each of them (possibly around 20 cents/pip total movement), and another thing is to be unhedged several thousand units per contract, that move a lot more probably $2/pip total movement. Let's consider an overall 100 pip disbalance from open to close: the microlots solution would drain by $20, while the minilots solution would drain by $200. And both versions are possible if you have $500 equity. So, which broker would you choose? (However, I have a friend that ran it on Crown Forex demo some time, and it showed profits when the feed was working well).

 

I don't recommend any broker for FPI, although...let's say EFX/MB Trading or InteractiveBrokers. No MT4 broker.Another good solution to recommend, that would be Strategy Runner based on Currenex datafeed. I have a broker friend that swear he saw direct arbs (bids>asks) on fridays.

 

In the days to come I will post the next strategy, the Swap Arbitrage (I am working on the article). The others, at their time.

 

P.S. Now correcting the graph of the Intercross, seems I swapped the blue virtuals on screen.