Simple High Profit low Drawdown Triangular Arbitrage

you have a bigger problem to solve:

- you dont trade a normal trading strategy, its only arbitrage!!, thats not really trading, its a step before. in real trading all counterparts have same informations at the same time, price and news, and so same chance to win. in arbitrage you have a time or information difference between both counterparts.
- your arbitrage is not testable in demo account for wins. you can calculate you to the richest person on earth, but will not happen in real accounts. you simple waste your time by any demo backtest and demotrading. i dont say you cant win maybe (dont know your chances), but you cant win any information with demoaccount backtest or forward test, thats for sure. you only can see if your arbitrage ea is working like its programmed.
- i dont tell you its difficult to develop this system, i tell you its impossible(!) to develop this system in demo account!
- "But if it works then I want everyone to benefit from it"- you are crazy , forget this point. if arbitrage would worh, there are so small amounts there to trade, you really believe when many will trade this same time some will get some amounts? you really have to learn some of the basics of this markets, there is no very high amounts all the time, its more easy if you read about basics by your own, it needs to much time to teach about this topic.
- i tried only to help you and save you many many time. if you will see it not as help, then ok.

@dukas_trader
I'm glad you have money to test unstable EAs on real accounts.
I'm also glad you think $10 is very little money to lose during testing of something you know will not work just to learn a valuable lessen.
To me $10 is a lot of money.

Time wise I only do this in my free time, otherwise I would have been done months ago.
Very little business can be done after midnight when I do most of my development on this and it helps to relax me before bed so it is fun.

You are talking in circles for I do not know what reason as I already stated that I agree with you that a proper test can only be done on live account.
I just want to delay it for as long as possible until I am sure everything programatically is stable, which it surely is not at yet.

I work in health and safety in the mining industry controlling gas monitor instruments, battery management, tag tracking, gate controls and multiple other hardware devices and then I apply all that and more to control employee movement, health, safety and during worst case scenarios rescues.
I have to have this system working on the deepest mine in the world Mponeng and multiple others.
I can not afford to do testing on site and risk peoples lives by small potential bugs just because it is faster to do it in the live environment.

I apply this kind of development to all my programs.
It need to be bomb proof before going live.
Then I will tweak it.
And if proven there that it does not work then so be it.

I appreciate any helpful information.
Do not think by repeating yourself I have not heard it the first time.
I'm not trying to hurt you with this EA.
Use it or don't.

I'm actually enjoying these to and through quite a bit
I'm weird

i see your point, but you are wrong in one thing:

you dont develop a trading EA, its "only " an arbitrage EA. there are other rules for it.
you can test programm problems in demo, but any backtest in demo, any forward test to see if there are wins, thats complete useless and even wasted time. thats my point. dont calculate any wins or what ever is in demo, never ever. real improvements can only be done in live accounts, in demo all is running different. if you want to do your steps in demo account, develop a trading EA, not an arbitrage EA!

Low risk trading this live because your hedged.

Hello everyone.

I have read with great care the whole thread, uploaded the right files in the right directories and for some obscur reasons, backtesting is always washing up the account slowly. Usually around 1 montth of test.

I have tried different time frames, but if i understand it right it does not have any importance since the EA uses ticks so... price action.

My broker is ICMarkets I have an ECN account 1:500 started with $3,000 (which reflect the reality of one of my accounts).

I do not understand what i do not understrand (It's like not remembering what you forgot sort of syndrome ).

I presume my setup has something wrong since everyone seems to enjoy this EA or trading technique.

Is there a magic wand somewhere that could make me understand ?

Thanks

@Forex-Loser
Well yes.
The EA is powered by you own personal time-turner, which should have been supplied to you after your 4th year at Hogwarts.
If for some reason the time-turner is malfunctioning then you might have spoken the name that should not be spoken.
In that case follow the following advise.

I need to see the logs to see why it is not working as it should work with 1:500, although I normally do not test with that high a leverage.

Do the backtest with a 1:200 leverage.
Also.
Attach the logs of the running EA so I can see if there are any problems and guide you from there.
At the start of the logs there should be a line "Spies ok, waiting for events".
Might by that one of my secret agents are not spying on one of the symbols.

Does it open up a lot of trades or only one ?

Something is throwing off the calculation and that tickles my fancy.
Would like to see what caused it in the logs so I can cater for it in a future update, so please attached your logs.

Greetings, Jacques, and thank you for sharing your findings with us. I read the whole thread and the more I read the more questions I had. So, here we go:

1) How do you get to take profit? As I understand, you close the orders in profit when it equals spread + commission cost + $0.50 per 0.01 of GBPUSD volume. For example, after you open orders on all the 3 currency pairs, your result floats around -$20 (that's what you call ZERO point, right?) and your GBPUSD order volume is 1.00 lot. Therefore, your triangle will close after the profit equals +$70 (20$ + 100*0.50). How is this possible for balanced position to fluctuate so much from the zero point? I opened 3 trades today on GBPJPY-USDJPY-GBPUSD, my zero point was -$30 and the best value I saw was -$20ish. And that leads to my second question.

2) Are you sure your positions are balanced in terms of volume?

3) Also I didn't quite understand this part:

"Now sometimes you do accidentally get in at just the wrong time.
Basically buying at the highest point and it never gets back to that point.
In 2 years time I found it about 9 times.
You can see these in the load spikes at the bottom of the chart.
This problem is solved by a minor grid.
Basically once you unluckily buy at the highest point then you will be stuck, but no worries, because it can only fall so far before coming back, but never past that point again so just wait a bit and let it fall and once it fell enough then Buy again the same amount and leave it for a guaranteed profit a bit more than half way back so just wait a bit."

What do you mean by "wrong time"? If you open positions simultaneously, then how entering at the highest point affect anything? Can you provide an example of this situation and how the "minor grid" comes into play?

By the way, you asked about a good ecn broker. Try alpari, I've worked with them for 2 years and ecn execution seems ok, even with my crappy internet speed. (Not affiliated with alpari, and this is not an advertisement).

@Gene-K
The version on post one is way out of date and contains a lot of bugs.
Some of which I already fixed in later versions.

I suggest you run the ea in post 1 containing the graph.

Run it on myfxchoice where I did most of my development to see what it does.
I ran it on multiple broker and found similar results everywhere.
Ignore the trades it makes for now as I found some problems, but the theory is sound.

One big change is that my trade entry point is not based on luck anymore and therefore I do not use a grid to get out of a wrong entry.

1)
Look at the chart being drawn.
There are 2 lines.
Think of the 2 lines the ask and bid prices, but in this case the Ask is a buy, sell, sell of the 3 currencies and the bid is the sell, buy, buy.
Or the other way around.
I cannot remember just now.

Each line is rather a channel representing the maximum and minimum of that line over the period.

In the middle of the lines is a 3rd line showing the average between the 2 lines and as you can see it is rock solid for at least a 3 years.
The limit of my tick data.

The distance between the lines is basically the bid ask spread for the 3 currencies.

The entry point of a position is when one of the lines crosses the middle line far enough to cover commission, a bit of profit, some extra for slippage and if you want swap, but I just ignore swap seeing that is so little.

The position is then left open until the opposite line cross the middle line for profit.


2)
Already answered, but yes. Rock solid for as long back as I could test it. 3 years.
And on multiple brokers.


3)
Forget the grid.
No need anymore seeing that the entry and exit is now precisely calculated, but simple line crosses.
By simple I mean months of code testing a simple theory.


As I said.
The ea is buggy, but the chart it draws are extremely useful to show what I mean and to see where the profit points are.

Yes once open it can take a couple of seconds or days to exit, but still profitable.
Same with open points.

Also.
These are spikes your trade.

But the smaller the spread and commission the closer the lines and the more crosses you will be able to trade.

I hit 4 trades on a demo last week before it crashed.
The ea. Not the theory.
It could not detect the market was closed and tried to close a poison and could only close one and left the other 2 to go into the red until their markets opened for a loss.
Overall a profit of $110.
Could have been $620 if the ea did not crash.

Just do not run the ea with the chart line for actual trading, because it is quite resource heavy.

Thanks for your reply, Jacques. Ok, I'll check the ea out.

@Gene-K
Good luck.

Keep an eye out on the forum.
I'm struggling to get time for this development, but I should have something new to put onto the forum in the next 2 weeks.
Something more compatible to different types of brokers.

Use 2-3 brokers each enter different currency, will it do? For example, in ur chart, u hedge between nzdsgd, sgd jpy, nzdjpy. Trade with 3 brokers. Each enter one currency. Will it do? Though spread and price might differ

@yan7181
Yes that should work.

I was planning to export the ea code to java to run it faster externally, which would mean it can then connect to anything from metatrader, jforex, fix and more and also to multiple brokers and combinations of it at the same time.

Different spreads will not matter, so long as the overall spread for all 3 is not too high, otherwise it will never trade for the arbitrage will not be big enough to cover the spread.

But still a good idea.
Brokers specialise in different currencies and therefore if you get a broker specialising in each currency with the lowest spread then it would be fantastic, just make sure the latency between all of them is extremely low to prevent slippage.
Latency might be the biggest problem.

But first I need to stabalise and test this ea, before enhancing it.

Also another big problem that might prevent this is that you will need multiple accounts ballances at multiple brokers, which will be unbalanced and therefore one will increase in profit extremely fast just like the other will lose money just as fast.
This account balance problem might be reason enough not to split it between different brokers.

Hello everyone.

My indigogo campain was a bust.
I got hundreds of emails from people wanting the ea with no one wanting to contributing to the development
At least I tried.
Still steaming away here and have got some nice updates to share with you all.

Ok this is a MAJOR update.

Rules changed a bit.
Still triangular on the 3 symbols.

But.
I now calculate what the average profit would be if I did a BUY, SELL, SELL and also SELL,BUY,BUY.
This gives me 2 lines.
Call the higher line the ASK line and the lower line the BUY line.

Between the 2 lines is the average line calculated over some time, which if mostly a straight line as the buy and sell lines basically cancels each other out there.

Now from time to time you will notice the ASK line cross the average line and this is the time you must open a Buy(Sell, Buy, Buy) to profit from the inevitable up movement.
Close the open buy once the SELL line cross the average line.
Do the opposite for opening a sell(Buy,Sell,Sell).

One more thing is that I do not just open when it crosses the middle average line, but I only open once it crosses the average line for some distance before opening.

Ok there is a lot more checks and stuff I put in the EA, but that is the basics.

I tested this on MyFxchoice with a leverage of 1:200 so try and keep to those settings.
I might work on other settings and I did try and build in intelligence to adapt to other brokers, but I had limited time and it might not work properly.
Backtest to make sure it works properly before a forward test.

DO NOT USE ON LIVE ACCOUNT.

Other things in the EA are :
1) Do not trade weekend gaps for the Monday slippage can be big.
2) Do not trade between midnight and 2 am for the same reason as (1).
3) Move all display and log coding after the system calculations to increase trade calculation performance.
4) Use only 50% of ac
count for trading, which only mean that 50% of the account must be converted to used margin.
Draw-down is about 5% then, but I can not increase it for fear of getting a margin call.
20% might be better, but I will test it one day.

5) Check for failed trades and kill them to start over.
6) Check for weekend and inactive markets to prevent system failure.
7) Check commission using single 0.01 lot trade.
8) Massive amounts of logs and graph code to display what is happening.
This uses a lot of memory so I must probably move it into another EA for display reasons only seeing that it is not needed to do trading with, but looks nice and you can see why the EA does what it does.
Then there can be one EA to do trading with and another display EA which you can load somewhere else to show the workings, without the display EA affecting the trade processing.

Problems:
1) Slippage and trade delays.
I am getting close to 500 milliseconds delay on opening 3 trades for the 3 symbols at a time.
This can cause some major slippage, especially on the 3rd trade, but luckily I still make profit on most trades seeing that the EA does cater for some slippage.
I'm still trying to find ways to decrease the time delay, but it seem to be a limitation on how metatrader works.

1.1) I might be able to improve the trade speed using 4 metatrader terminals and I have already created programs to allow EAs communicate with the outside world within less than 1 millisecond, but there is still a delay of about 300 milliseconds for a single trade to start.

On the bright side I have now developed a driver that can connect an EA to anything else from other EAs to other terminals or even outside programs like java and even to other PCs in other countries or any other device for that matter or even making a metatrader EA use things like the FIX api.
The possibilities are big for this driver.

1.2) Delayed trade starts seem to be caused by the terminal logging out if there is no trade action for some time and when a new trade is needed then the terminal for have to take some time to log back in before the trade can be opened or closed.
I could not find a way to prevent logout, EXCEPT by sending dummy trades or impossible pending trades or trade modifications every 20 to 30 seconds.
Problem with this might be that broker will not appreciate receiving so many trade signals.

1.3) FIX API.
I have been playing around with FIX api and it might be a solution to this trade delay, but I need to test it first and .... well... time is not on my side

*******************************************************************************
RUNNING THE EA
*******************************************************************************
Do not run on live account.

Just attach the EA to a chart ....... That is it

Some more details.
The EA is made to run with symbols GBPUSD, GBPJPY, USDJPY
Exactly and it is case sensitive.
If those symbols is not in your market watch or trade able then it will not work, UNLESS...

There are a couple of parameters in the EA you can set.
Mostly the trade symbols.
Keep in mind the EA is only made for GBPUSD, GBPJPY, USDJPY
BUT if your broker contains symbols like GBPUSD#e ex.. then you can use the parameters to change the EA to use your broker's symbols.
Keep in mind it is case sensitive and therefore if your broker lists GBPUSD#e and you put in GBPUSD#E then the EA will not work.

To view the chart drawn by the EA I suggest making the chart window background BLACK and zoom the chart out by dragging down on the right hand vertical price bar till u can see all the lines the EA draws on the chart.
I'll even suggest making everything black as the chart price gives no useful information.

what if......... you took it a bit deeper in order to overcome some realities....like spread and such.......... if the the concept is sound..... can we invent a method that does not rely on such small gains and losses so as to have the spread be a killer?

for example: what if you took you initial trades or GJ and GU BUT you let them run for 24 hours or let it run until there was +100 or -100 dollars.............. Then you took a UJ trade or hedged it...... what would happen? your account would either be plus of minus but once you took your full triangle it would be locked in yes? hedged yes?

IF you knew that price always retraces at least 20%, 98% of the time (or whatever variance you knew it did).... would this help you to figure out a way to make an eventual profit? for example if your hedge was -100 dollars it would fluctuate to -80 dollars eventually...... so for every loss your close it at -80 dollars but for every win you close it at +100 dollars

of course those are hypothetical numbers, on average assumptions.

https://www.forexfactory.com/showthread.php?t=583322 <<< this concept (in first post, video)

have no idea how to code so please don't ask...just throwing the idea over to you for your consideration
i can already see the pitfall being a big trend and lots of losing days in a row..... maybe you can counter that somehow? maybe it won't matter?

maybe you let the trade run only 10 minutes or 1 minute rather than one whole day.... just used 1 day to illustrate the idea

That way, the profit is in the variance. The fluctuation of price = profits. But said fluctuation must be large enough to overcome spread.... the larger the range the better, no?

think of cutting your losses(with 20/20 hindsight)...but not letting your profits run...but 100% banking your profits..... you still come out way ahead of the game, right?

https://www.forexfactory.com/showthr...1#post10321351

anyhow, the basic concept is to take profit from the fluctuations.... the challenge is the fluctuations you have get eaten by the spread...the obvious solution is to increase the amount/size of fluctuation... yes? however that is accomplished. different kind of hedge besides triangle? multiple hedges, whatever....you can thank me later lol please share the source code if you accomplish it

just musing

Thanks

@Everyone
I forgot to add an EA that you can back test with.
The ones for forward testing are using an infinite loop and therefore will freeze a back-tester.
This one I'm attaching now will just be activated during each tick of the chart.
Therefore it will miss some opportunities, but still useful to see the back-test results.

@dagoods
Unfortunately leaving out one of the 3 legs of the triangle will destabilise it.
Then the profit/loss will go fast into profit or loss with no limit.
Once the 3rd leg is activated then yes you will lock in the profit or loss, but you will never regain the loss.

As you said that if it is loss then once locked with 3rd leg then you can wait for some loss to be recovered, but not all and in this case you could just as well have started with 3 legs in the beginning and just waited for it to go into profit.

In theory you should be able to make at most the same amount of profit this way as with starting with 3 legs, but the biggest problem is then sudden spikes or trends which will cause massive drawdowns.
Therefore to go this way you have to use a much smaller amount of lots so that the drawdown does not kill your account.

Also.
Having only 2 legs will cause profit/loss with no limit, which is no different to the normal forex market where a top or bottom can always be broken, whereas with 3 legs the tops and bottoms are extremely stable and therefore you can bargain on them.

The EA I have created already cater for any spreads or commissions.
The smaller the spread/commission the more arbitrage opportunities.

Run the backtest ea in a backtest to see how the 3 legs affect each other.

Keep also in mind that at the moment I am only using GBPUSD,GBPJPY and USDJPY, but there are multiple other triangles that should also work.

ok so set it for 100 dollars profit or loss which ever comes first, before locking in your hedge..... if the spread is 4 dollars... & the fluctuations are around 20% i.e, = 20 dollars...that should be doable, yes?

each loss = -84 dollars and each win = +100 dollars


if
50 wins +5000 &
50 losses -4200

you net 800 dollars

yes?

@Everyone
I did not include the modifiable parameters into the EAs.
The newly attached ones contains the parameters so you can make sure the symbols match your broker's symbols.
Keep in mind that the EAs is set to not use a lot of your account balance.
If you back-test you will see the maximum draw-down is quite low.
A 3rd parameter allows you to set the amount in % .. 0.5 = 50% of the account balance not to use.
If you want to make it aggressive then try 0.1 or 0.2 on a leverage of 1:200.
Problem is not that you will bottom out your account, but that you might hit a margin call if too aggressive.
So even with a stop out your account will still survive, but you will take a loss so why risk it.
Even at 50% where it stays far away from margin call it still makes good profit.
Be careful for greed.


@dagoods
Unfortunately it will still not work.
I tested it for fun and trading only 2 symbols makes the trading completely random or market dependant, which is random enough.
So yes. Losses will be -$84 and profits $100, but the split will not be 50/50 and it might side with the losses more to 20/80 or worse.
The 3 trades must be there from the beginning.

As for the other grid thread you referenced.
I tested the EAs they gave there and could not find one that made a good profit.
Also they have massive draw-downs, which could kill accounts, but then again.
Maybe I had the wrong settings.
What I do not like about grids like that is that eventually during big trends they tend to cause big draw-downs, which will either kill your account or if you set the trading size very small then it will make very little profit.
I have written quite a lot of grid EAs in the past and could not really find one that works.
A grid might be useful to improve another already working strategy.

I tried a grid strategy with this triangular EA, but although it improved the profit a bit it also increased the draw-down a lot so I decided to keep it simple (well sort of not really).

How many trades by day the new system do?

@faryne
It depends on a lot.

But about one every 3 or so days.
Sometimes on rare occasions a week can go by with no trades.
Once open it closes normally within the same day.

But more often than not.
If there is arbitrage opportunities then there is normally multiple arbitrage opportunities the same day.

So once every few days, but then multiple times that day.

You can see it if you use very accurate real tick data on a back test for about a month back.
I got about 4 hits last week, but the week before I only got 1, then again I only started it on that week on the Thursday.

I am however struggling with trade lag.
Because trades do not open so often then metatrader need to reconnect to the trade server every time a trade is made and this delays 3 trades by between 500ms and 1 seconds, which is a massive delay and causes slippage.
I have seen this even on metatraders with a 7ms link.

What is strange is that metatrader 5 seem to be much faster, closer to 200ms to 400 ms.
Maybe mt5 have got a way to keep the connection open.

I'm still looking for ways to decrease the trade execution speed to decrease slippage.
I'm looking into using FIX api later to improve the speed.
I have created a couple of drivers in the process of trying to improve the speed to connect and EA to external processes, which can include an application that can use the FIX api.
I am planning to create a JAVA app to do the FIX trades using multiple threads and a way to monitor and keep open the trade server connection and the EA to just display the nice lines on the chart

Another way to to create dummy trades to keep the trade server connection open, but that will anger brokers, because it sounds like for this to work I have to send a trade once every 25 seconds. Not good for the broker.

Thank you. I thought there was several each day.
I just got a position, so it's actually working.