Using Triangular Arbitrage and Skew to trade EURUSD

Making some great progress on scalping the EURUSD with low draw downs and nice results
If you would like to help beta test this in demo let me know

This is a much more sophisticated algo but at least it relies on "real" market events.

Glad to to share if anyone is interested. It would be great if someone had experience out there with this on the Quantitative Analysis side so that I can make these even better.

I will continue to share

http://www.forexfactory.com/attachme...1&d=1357924134

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Count me in.
I have been doing arbitraje on and off for a while. Not latency triangular but I understand
the concpets very well.

J.

No problem. Just send me a private message and I will email you when the Beta is up.
Glad there is some interest in this. I am strong believer in trades as a result of "structural market changes", rather than functions of "tick data"

I'd like to take a look as well. From what I can tell the pricing algorithm that my broker uses (market maker) eliminates pretty much all mispricings. I've run my triangular arbitrage ea for long periods of time, and have only recorded small events around the holidays. But, it doesn't look like you are actually executing the arbitrage but just using it as an indicator so it may be another matter entirely.

Investopedia says it's a "risk free method". How much is that true?

That wouldn't apply in this case. He is just using the synthetic pairs as part of the model, and isn't buying or selling them (according to the screenshot).

Also I was going to ask, what sort of connection is the application geared for? Are you using a broker api or is there an mt4 dll?

I hope it connects to mt4, my broker's api is 600/month haha.

Another question. It seems as if an important part of your algorithm is the skew of the ema. I just wanted to clarify for myself, does this mean you are measuring the skew of a moving average (where would you sample it ) ? or is ema here a reference to another algorithm?


Thanks

hello

"If you would like to help beta test this in demo let me know" = YES

just let me know...

regards

Hi Yuri,
I hope this thread does not turn into an triangular Arbitration thread. That has been tried several times over the years.
I mean the latency arbs in between 3 pairs, trading all 3. That is consider a "risk free" system but no one has never been able
to take advantage of.

I believe Pair18 is after trading only 1 pair of the of the triangle and he is mentioning the EUR/USD. But
using the triangular arbs info to trigger trades. That's it.

J.

hi

I was working on arb between feew brokers. this week started to think about writing own code to arb at the same broker with triangles. so I can join beta testers. just write me pm

Sorry I have been out of pocket for a couple of days.

Lots of good discussions in the last few threads.

I received lots of folks that would like to see the Beta, which is great because I really do need people to test this and provide suggestions going forward so that I can make this better.

I will provide everyone a access to a "beta" that asks. Just send me your email and I will send you the "beta" when it is ready.

I will try to answer your questions one by one in the next day or so.

OK..
Let me try to address Saussiche’s questions first.
i) Saussiche Quote: it doesn't look like you are actually executing the arbitrage but just using it as an indicator so it may be another matter entirely.
a. My Response: You are absolutely correct. A single broker will likely throttle any attempt to trade an entire ring at the same time. Mainly because some of the time there is an inverted trade that caused the ring (not always though!). The other reason not to go after the trade is simply that the chances of getting the entire ring all at once with good execution and making in excess of the commission you need to break even in a retail environment is almost “zero”; Combine that with the fact that you need to un-wind the trade after you buy the ring to flatten your positions. 6 trades netting a profit. Very unlikely. I am using differences in Synthetic Price and Actual Price as one of the inputs in the model.
ii) Saussiche Quote: lso I was going to ask, what sort of connection is the application geared for? Are you using a broker api or is there an mt4 dll?

I hope it connects to mt4, my broker's api is 600/month haha.

Another question. It seems as if an important part of your algorithm is the skew of the ema. I just wanted to clarify for myself, does this mean you are measuring the skew of a moving average (where would you sample it ) ? or is ema here a reference to another algorithm?
a. My Response: A couple of questions/answers here.
i. Broker API written directly
ii. The EMA is an EMA of the Order book Skew. Calculation is fairly complex and also a memory hog. It’s usefulness is debatable at this point. Definitely open to other factors during the beta process

Oh I forgot to mention that I am pretty cost conscious and the way the program works there is no charge for the Broker API (at least where I have initially written it)

I agree with you that $600/mth is nuts!

You would want a fast connection though, but I found a way to do that for inside $100 a month.

On to Yuri57's question

Yuri asks...."Investopedia says it's a "risk free method". How much is that true?

My opinion is that there is NOTHING risk free.

That assumes that you buy the entire ring and you were guaranteed perfect execution. As I said in my answer in the last post, you will not be able to get those rates because of, broker intervention, slippage, speed....yada...yada...yada

How do you connect to your brokers server outside of the trading platform without paying fees? I didn't think this was possible. Which broker do you use?

Also I found a vps provider a while ago that has servers collocated in exchanges for 10/month, one of the data centers is right next to my broker's mt4 server (oanda). Although you mentioned the calculation is memory intensive and the costs scale up based on the allocated memory (10 dollars gets only 256 mb).

Thanks.

OP didn't say his broker was 0anda but the $600/month API fee was a dead give-away .

Yeah there is no reason to pay for a feed. Nice revenue stream for the broker

I have had many folks ask to be on the demo and ask about timing....waiting for a little more feedback on V0 before sending the V1.
Don't know an exact date, but if you sent the email, I will include you, I promise
You can send it as a private message or if you like to [email protected]

Just finish running Version Zero (V0) for about 45 minutes...Not bad

http://www.forexfactory.com/attachme...1&d=1358352095