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The very first arbitrage: Choosing your broker


TheEconomist

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This is, indeed, the first decision that you have to make.

We have two categories of brokers (I mean only from MetaTrader brokers here):

 

1. US, trusted, NFA-regulated, USELESS brokers.

2. Non-US, controversial, FSA or other regulation authority, USELESS or USEFUL brokers.

 

The term "arbitrage" from the title has its initial meaning : choice.

 

Except for the Intercross Arbitrage and the Swap Arbitrage, which work with forex only, all the other arbitrage strategies, which are also the "normal" arbitrage strategies found in books, require futures contracts implementation in MetaTrader. It seems they can only be implemented as CFDs. And NFA is against this.

So if we choose a US broker, we are left with:

a. Intercross Arbitrage

b. Swap Arbitrage

The Intercross Arbitrage relies on broker delivering not only small spread contracts, but real, not "engineered" quotes that can be used to arbitrage different versions of the same currency crosses. The Swap Arbitrage relies on small swap spreads combined with stability in time, which can't be forecast...

 

The second type of brokers may be USELESS or USEFUL.

If their datafeed is as poor as the first kind, it's stupid to even think opening the account. You can get the same datafeed from a trusted broker.

But if they come with currency futures, commodities, even swap free feed on forex, they are USEFUL as arbitrage techniques may be applied with success. However, GETTING THE MONEY OUT of there may be an issue, but as long as they are regulated, is a risk worth to be taken...

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so what really broker are viable for triangular arbitrage? so far MBTrading is not useful.

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so what really broker are viable for triangular arbitrage? so far MBTrading is not useful.

 

Oh , I guess Michal knows better :wink: I don't think MT brokers are reliable for that; perhaps sometimes it will trade, but nothing guaranteed; now if you say MBTrading is not good, you could try InteractiveBrokers. If neither that is good, you are left with Currenex and Dukascopy - but you need lots of cash; these are the best of the forex. However, their automation requires the hell of a programmer, cause it's FIX based...

However, among all the strategies, Intercross is the hardest to implement. I'm not even thinking about it anymore!

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