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Arbitrage trading (synthetic quotes)

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  • First Post: Dec 9, 2019 2:49am Dec 9, 2019 2:49am
A topic about arbitrage trading using synthetic quotes.

Example:
EURUSD = EURGBP * GBPUSD

So we need 3 quotes here.
EURUSD
EURGBP
GBPUSD

And then you will see that usually there is a small difference between the actual quote (EURUSD) and the synthetic quote (EURGBP*GBPUSD).

Now the idea is to take trade decisions based on this difference, this gap.

Example:
Buy EURUSD if the synthetic quote is 1.0 pip above the actual quote

Variations:
EURUSD = EURGBP * GBPUSD
EURUSD = EURNZD * NZDUSD
EURUSD = EURAUD * AUDUSD
EURUSD = EURJPY * 1/USDJPY
EURUSD = EURCAD * 1/USDCAD
EURUSD = EURCHF * 1/USDCHF

6 options by using to pairs to compute the synthetic quote.

Then you can create different models. For example, buy EURUSD if 2 synthetic quotes are 1.0 pip above the actual quote.

Or another one. Buy EURUSD if the average of 2 synthetic quotes are 1.0 pip above the actual quote.

Difficulties
There are many models that you can use.
Make sure that your broker allows this kind of trading.
Keep track of your execution, you are aiming for a tiny profit (in pips) which will get lost if your execution is not good.
The spread needs to be low, otherwise your tiny profit can't overcome the spread.

Are people here using this kind of trading strategies?
This only works in fantasy, not in real live trading.

Tested over time, again and again

Its not always >>> EURUSD = EURGBP * GBPUSD

Download free "arbitrage" EA over MQL market and test it to confirm my statement.
So let's start with something simple and straight forward.

Trade EURUSD by use of EURGBP and GBPUSD.

Buy when the gap is minimum 1.0 pip and keep a SL and TP of 20.0 pips.

For now we don't look at spread, commissions and slippage.

Results based on 4 months of data.

Total result is 279,3 pips in 175 positions.

In a graph:
https://i.imgur.com/xytte94.png
Quoting scalprobot
So let's start with something simple and straight forward. Trade EURUSD by use of EURGBP and GBPUSD. Buy when the gap is minimum 1.0 pip and keep a SL and TP of 20.0 pips. For now we don't look at spread, commissions and slippage. Results based on 4 months of data. Total result is 279,3 pips in 175 positions. In a graph: https://i.imgur.com/xytte94.png
Scalprobot, please clear your thought and give a example,how can I meserment that synthetic quote is 1.0 pip above the actual quote ?
Quoting zamans98
This only works in fantasy, not in real live trading. Tested over time, again and again Its not always >>> EURUSD = EURGBP * GBPUSD Download free "arbitrage" EA over MQL market and test it to confirm my statement.
Zamans is right, this is newbie fantasia. There's not a single broker in the world who would quote an arbitrage difference of 1 pip. If there was the broker would be bankrupt in days.
It takes blood, sweat and enough tears to wash away the blood.
Going forward, the same test, but now on GBPAUD.

GBPAUD = GBPUSD * (1/AUDUSD)

Total result is 2297,9 pips in 1874 positions. On average just over a pip per position. This won't be profitable after spread/commission/slippage. We need to increase the pip/position ratio. If the ratio is enough to overcome the "cost of trading" and even the value used as a trigger, this might be a good system to choose the direction of your positions.

In a graph:
https://i.imgur.com/semUkd5.png
Let's increase the trigger from 1.0 pip to 2.0 pips to see what that does with the results.

Now we get 2439,2 pips in 1221 positions. That's just under 2.0 pips per position, on average.

In a graph:
https://i.imgur.com/0TMQIB1.png
My aim for today is to increase average result of a position, because with the 2.0 pips per position, there is nothing we can earn, after spread/commission/slippage.

Let's increase the trigger from 2.0 pips to 3.0 pips. Now we get 1458,9 pips in 573 positions. That's just over 2.5 pips per position. The average result is increasing and we get fewer positions.

In a graph:
https://i.imgur.com/7gpYXCM.png
Hallo
Good idea!
Find it The Best Entry Points
Scalprobot,did you use any robot?
Yes, I'm using robots for this kind of trading.
Please share your ea
I think it will be better for all, long term, to first work together on the strategy.
Hello Friends,

try this, i hope you find this type,

--------------------------------------------------------

how to use it....

Put EA on GBPAUD Chart, Time Frame M30 ( by Default setting is good for all )

auto lot size as per Money Management, same as auto close as per Equity Profit %,

if any issue, feel free PM me,

Enjoy...!!! ( Trial Version till date : 30/06/2020 )

- jesing sumesara
Attached File(s)
File Type: ex4 The Jesing Magic - Triangular Arbitrage V1.1.ex4   15 KB | 717 downloads
Always Feel Good...
Quoting scalprobot
A topic about arbitrage trading using synthetic quotes. Example: EURUSD = EURGBP * GBPUSD So we need 3 quotes here. EURUSD EURGBP GBPUSD And then you will see that usually there is a small difference between the actual quote (EURUSD) and the synthetic quote (EURGBP*GBPUSD). Now the idea is to take trade decisions based on this difference, this gap. Example: Buy EURUSD if the synthetic quote is 1.0 pip above the actual quote Variations: EURUSD = EURGBP * GBPUSD EURUSD = EURNZD * NZDUSD EURUSD = EURAUD * AUDUSD EURUSD = EURJPY * 1/USDJPY EURUSD =...
the exploitation of the different quotes of two currency pairs instead of the differences in price between two currencies in the same pair
Quoting jesing
Hello Friends, try this, i hope you find this type, -------------------------------------------------------- how to use it.... Put EA on GBPAUD Chart, Time Frame M30 ( by Default setting is good for all ) auto lot size as per Money Management, same as auto close as per Equity Profit %, if any issue, feel free PM me, Enjoy...!!! ( Trial Version till date : 30/06/2020 ) - jesing sumesara {file}
Get a critical error when I try to run it.
2019.12.22 23:22:24.300 GBPAUD,M15: 1 tick events (1 bars, 21679856 bar states) processed in 0:00:00.000 (total time 0:00:08.953)
2019.12.22 23:22:24.300 2019.01.03 00:00:00 Testing pass stopped due to a critical error in the EA
2019.12.22 23:22:24.299 2019.01.03 00:00:00 The Jesing Magic - Triangular Arbitrage V1.1 GBPAUD,M15: zero divide in 'The Jesing Magic - Triangular Arbitrage V1.1.mq4' (192,49)
2019.12.22 23:22:24.299 2019.01.03 00:00:00 The Jesing Magic - Triangular Arbitrage V1.1 inputs: MMPercent=2; TotalProfitPercent=1; magic=4521;

Any suggestions?
I once heard of a guy who used this arbitrage method but the way he did it was on multiple brokers and not the same broker. So he’d have accounts at all the brokers and compare symbols and take trades based on that. He built his own software to import the data from each broker and would use it to make the analysis. anyway that’s all I know and I know he made millions. Man some people just have the gift of eureka moments and passion to learn and apply coding
AI Indicator: https://discord.gg/K6VTU6XV
Quoting NinjaSF
{quote} Do you have source codes mql to edit ?

hello,

sorry it's my 2.5 year hard working, i don't send source file, so sorry for that,

if you suggest about modification, feel free ask me, i try my best,

this is v1.1, i already modified v2.3 latest version, work fine with good return,

- jesing
Always Feel Good...
Quoting faschim
{quote} Get a critical error when I try to run it. 2019.12.22 23:22:24.300 GBPAUD,M15: 1 tick events (1 bars, 21679856 bar states) processed in 0:00:00.000 (total time 0:00:08.953) 2019.12.22 23:22:24.300 2019.01.03 00:00:00 Testing pass stopped due to a critical error in the EA 2019.12.22 23:22:24.299 2019.01.03 00:00:00 The Jesing Magic - Triangular Arbitrage V1.1 GBPAUD,M15: zero divide in 'The Jesing Magic - Triangular Arbitrage V1.1.mq4' (192,49) 2019.12.22 23:22:24.299 2019.01.03 00:00:00 The Jesing Magic - Triangular Arbitrage V1.1 inputs:...

hello ff friend,

here using 3 pair, so it's not work on strategy tester, so get error,

i think you try on demo version first,

- jesing
Always Feel Good...
Quoting tiestobob
I once heard of a guy who used this arbitrage method but the way he did it was on multiple brokers and not the same broker. So he’d have accounts at all the brokers and compare symbols and take trades based on that. He built his own software to import the data from each broker and would use it to make the analysis. anyway that’s all I know and I know he made millions. Man some people just have the gift of eureka moments and passion to learn and apply coding

hello,

it's sure arbitrage, but same broker, so don't worry about that,

try on demo first,

- jesing
Always Feel Good...
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