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Arbitrage with no-interest broker

  • #41
  • Nov 29, 2006 7:07am Nov 29, 2006 7:07am
Quoting real5
titikokatiting - EVERYTHING you described above is a sure way to loose .

- interest rate - is just silly - sounds like you a begginer, emotions and forex will swallow your $100000

-hedging strategies with option and futures - seriously, read up on it - major hedge funds screw this up - and they do this for living

sorry for not elaborating, but i just woke up - maybe a bit later(plenty info on the net, look it up just not from brokers)

overall if you have a spare $100000 - why not trade without margin with a bank directly(i.e. UBS and alot more options) - alot safer and easier to make $3000 a month than lose it through complecated strategies with a good for nothing broker that your are talking about.

best,
Steve
what do you mean trade without margin with a bank? would that guarantee 3000 dollars a month?
  • #42
  • Nov 29, 2006 7:11am Nov 29, 2006 7:11am
Quoting Rezo
2% is a good result. all I can say is good luck!

bus still:

about monthly candle - look at the weekly, because if it moves 2 times 300 pips a week... for eg: last december we had 600 pip candle in one week on USDJPY. Ranging markets whould be prefoect conditions for you.

and be careful with broker to get "same quotes".

other than that - I only wish you good luck!

Rezo

thanks for the comment, when that happens, im sure i might not earn a lot on that month cause i have to close my position maybe every week. maybe what i can do is wait for the price to settle before i make a trade, i wont lose a thing if i dont trade for a week, then i'll hedge again when i see that the market is not that volatile anymore..
  • #43
  • Nov 29, 2006 7:13am Nov 29, 2006 7:13am
Quoting Rezo
2% is a good result. all I can say is good luck!

bus still:

about monthly candle - look at the weekly, because if it moves 2 times 300 pips a week... for eg: last december we had 600 pip candle in one week on USDJPY. Ranging markets whould be prefoect conditions for you.

and be careful with broker to get "same quotes".

other than that - I only wish you good luck!

Rezo
by the way, what do you mean by "(and be careful with broker to get "same quotes".)"
  • #44
  • Nov 29, 2006 7:38am Nov 29, 2006 7:38am
Quoting titikokatiting
by the way, what do you mean by "(and be careful with broker to get "same quotes".)"
to have same price on both accounts when buying on one and selling on another. same or even better in your favour. But still, I agree with Steve - this is a dangerous game... mostly due to spreads and diffferent prices that the 2 brokers may quote you at the same time.

Steve, major hedge funds that you mentioned cannot do this... futures traders dont have brokers who have no roll over (interest rate). We are purely discussing the theory of "taking advantage" of brokers who allow accounts without rollovers. mostly this is for retail clients. Of course most (or all) of serious brokers dont allow to have this type of accounts.
  • #45
  • Nov 29, 2006 7:38am Nov 29, 2006 7:38am
Quoting titikokatiting
what do you mean trade without margin with a bank? would that guarantee 3000 dollars a month?

it won't guarantee since you still have to make 300 pips a ponth to get $3000, but its a little bit easier if you can hold your position and never incur a margin call

rezo, thx for elaborating - i meant they do imploy strategies of takeing somewhat offseting position on different markets but there's just way more to it than just buy and sell
  • #46
  • Nov 29, 2006 7:41am Nov 29, 2006 7:41am
Real5,

Regarding the interest rate, you're apparently not doing the math.

Let's bring this down to "lower dollar" math to see if you can't understand.

At 100:1 100K units of the USD/JPY requires $1,000.

If you have a $5,000 account, then your position can move against you by $4,000...right? Now, the USD/JPY roughly gains/loses $9 per pip. That's about 444 pips that you can survive on the weak-account alone.

Now, remember that other account that you're using to hedge? Well, it will also require $1000 and can also survive a $4000 move. Well, let's say you have a $3000 move...the weak account will have $2,000 (and can only survive $1,000 more in the same direction) but the STRONG account will have $8,000...so, what to do? Take $3000 from the strong account and wire it to the WEAK account, and now you have a balanced hedge again. Now, remember, the maximum amount you can transfer from one account to the other is $4,000 because the rest will be unrealized profit...so mathematically, your weak account can survive a total move of 888 pips. How many 888-pip moves are going to occur in a year? 2, maybe 3?

I've been doing this for a few months now, and everything is fine.


Quoting real5
titikokatiting - EVERYTHING you described above is a sure way to loose .

- interest rate - is just silly - sounds like you a begginer, emotions and forex will swallow your $100000

-hedging strategies with option and futures - seriously, read up on it - major hedge funds screw this up - and they do this for living

sorry for not elaborating, but i just woke up - maybe a bit later(plenty info on the net, look it up just not from brokers)

overall if you have a spare $100000 - why not trade without margin with a bank directly(i.e. UBS and alot more options) - alot safer and easier to make $3000 a month than lose it through complecated strategies with a good for nothing broker that your are talking about.

best,
Steve
  • #47
  • Nov 29, 2006 7:48am Nov 29, 2006 7:48am
Quoting titikokatiting
what do you mean trade without margin with a bank? would that guarantee 3000 dollars a month?
he meant that if you have 100k, you dont need margin to trade 1 lot.

but you will still need margin, because if (god forbid) you lose 1000 buks, you will need to be margined to get 1 lot on USD based pairs. lot is a must on fx trading platforms. if you will be directly buying on your account currencies, spread in bank will be killing.
  • #48
  • Nov 29, 2006 7:48am Nov 29, 2006 7:48am
mrmikal, i never said its impossible - theory and math comes together and makes sence and probably even for a few month of such practice.

im glad it works for you, but i still belive it won't last long and the cause, anyone serious about forex know, that is impossible to predict
  • #49
  • Nov 29, 2006 8:10am Nov 29, 2006 8:10am
Real,

I don't see what you're getting at? unpredictable?

as one account goes up by 1 pip, the other account will go down by 1 pip...net loss = 0...

Let's say there was broker arbitrage...how much arbitrage do you think you're going to get???? 444 pips? I very much doubt it...I could see MAYBE 20 pips, but that would quickly correct itself...

I jumped in the conversation a little late, so perhaps you're referring to something else...but the perfect hedge strategy (buying and selling 1 currency in separate accounts and profiting off of the swap) IS a safe way of investing in forex for the long term.

Quoting real5
mrmikal, i never said its impossible - theory and math comes together and makes sence and probably even for a few month of such practice.

im glad it works for you, but i still belive it won't last long and the cause, anyone serious about forex know, that is impossible to predict
  • #50
  • Nov 29, 2006 8:12am Nov 29, 2006 8:12am
thanks for helping me explain, can't express what i mean very well. that's exactly what i was thinking!
  • #51
  • Nov 29, 2006 9:08am Nov 29, 2006 9:08am
Quoting real5
anyone serious about forex know, that is impossible to predict
but noone is talking about predictiin anything... 2 oposite trades on same pair... no need to predict direction.

I think there is a misunderstanding here. you said you just woke up, so its ok
  • #52
  • Nov 29, 2006 9:16am Nov 29, 2006 9:16am
Quoting mrmikal
Real,

I don't see what you're getting at? unpredictable?

as one account goes up by 1 pip, the other account will go down by 1 pip...net loss = 0...

Let's say there was broker arbitrage...how much arbitrage do you think you're going to get???? 444 pips? I very much doubt it...I could see MAYBE 20 pips, but that would quickly correct itself...

I jumped in the conversation a little late, so perhaps you're referring to something else...but the perfect hedge strategy (buying and selling 1 currency in separate accounts and profiting off of the swap) IS a safe way of investing in forex for the long term.

i am thinking about leverage and how leverage will affect this strategy, for example, i have 100,000 dollars and im gonna put the 50,000 to a broker that has a leverage of 1:400 that gives interest and i will place a 10 lot order( which is equivalent to 2500 dollars) and the other 50,000 dollars to a broker that has no swap with a leverage of 1:100 (im gonna put also 10 lots). on my first account with the 1:400 i still have 47500 dollars remaining for my margin call, i guess if im not mistaken will extend my pip margin an additional of 75 pips, can anyone confirm, will there be any advantage when choosing a broker with higher leverage?
  • #53
  • Nov 29, 2006 9:28am Nov 29, 2006 9:28am
Quoting titikokatiting
i am thinking about leverage and how leverage will affect this strategy, for example, i have 100,000 dollars and im gonna put the 50,000 to a broker that has a leverage of 1:400 that gives interest and i will place a 10 lot order( which is equivalent to 2500 dollars) and the other 50,000 dollars to a broker that has no swap with a leverage of 1:100 (im gonna put also 10 lots). on my first account with the 1:400 i still have 47500 dollars remaining for my margin call, i guess if im not mistaken will extend my pip margin an additional of 75 pips, can anyone confirm, will there be any advantage when choosing a broker with higher leverage?
Higher leverage will obviously make you last longer, but the question becomes how much longer.

I don't think there's much of a difference bettween a 200:1 and 400:1 as a $250 per lot requirement versus a $500 per lot requirement gains you only $250 movement per lot...that's an additional 27 pips. Now, if you have 400:1 and 100:1 the difference is $750 which is about 83 pips difference. How significant is that? I don't really know, but I can tell you it's probably not as significant as choosing your interest bearing broker correctly. You want a broker with the highest premiums available with the lowest margin requirements. Plain and simple. That will outweigh any leverage requirements (barring going from 100:1 to 50:1...at 50:1, you lose 25% of your movement ability...effectively going from 444 to 333 pips)
  • #54
  • Nov 29, 2006 9:41am Nov 29, 2006 9:41am
Quoting mrmikal
Higher leverage will obviously make you last longer, but the question becomes how much longer.

I don't think there's much of a difference bettween a 200:1 and 400:1 as a $250 per lot requirement versus a $500 per lot requirement gains you only $250 movement per lot...that's an additional 27 pips. Now, if you have 400:1 and 100:1 the difference is $750 which is about 83 pips difference. How significant is that? I don't really know, but I can tell you it's probably not as significant as choosing your interest bearing broker correctly. You want a broker with the highest premiums available with the lowest margin requirements. Plain and simple. That will outweigh any leverage requirements (barring going from 100:1 to 50:1...at 50:1, you lose 25% of your movement ability...effectively going from 444 to 333 pips)
you are right. i have to find the best broker for this strategy, any suggestion who? you can PM me. thank you very much for helping me here.
  • #55
  • Nov 29, 2006 9:44am Nov 29, 2006 9:44am
Great thread title. All the noobs come a runnin'.
  • #56
  • Nov 29, 2006 9:58am Nov 29, 2006 9:58am
Quoting twinchell
Great thread title. All the noobs come a runnin'.
what do you think of the system? any suggestion, in theory and math, in can work right?
  • #57
  • Nov 29, 2006 10:02am Nov 29, 2006 10:02am
There was a guy on the forum here a year ago or so back that advocated the type of trading being discussed here. I cannot locate him any longer, electricsavant was his name. He had it worked out in a spreadsheet, which pairs to use etc.
One of the probs if I recall was finding a broker to give you the high leverage mentioned on this amt of money, (50K).
http://www.migfx.ch/forex/islamic-fo...-accounts.html
has swap free/islamic trading accts. You do not need to have a religious reason to have a swap free acct (so says their literature) There is a round trip charge per trade. Might be a place to start.
This type of setup is not gonna be easy as brokers are on the lookout for such setups but I wish you well.
In trading, there is no bullshit. You either make money or you don't.
  • #58
  • Nov 29, 2006 10:45am Nov 29, 2006 10:45am
Back to hedging against futures and options, just so all is aware the interest is always built in to the price of futures and options, so it is not possible to do a pure hedge using these instruments. Only way is to have two brokers with and w/out swap rates, and either have very large accounts or swap back and forward.
Kjellik74
  • #59
  • Nov 29, 2006 10:55am Nov 29, 2006 10:55am
hi mr. green. thanks for the advice. here's what i think i could do...in case the broker won't allow a $50k account to have a leverage of 100:1 or higher can't I split my money into 4 accounts instead of just two? say I name one after my sister, but I will be the one who will use it. And for the other broker, I'll do the same. One account named after me, and one for my sister. That way each account is $25k. I'll place the same number of lots on each and end up with the same hedge as if I had only two accounts with two different brokers. But I saw a broker that says on their website "minimum of $5k, up to $50k" for a standard account.
  • #60
  • Nov 29, 2006 10:57am Nov 29, 2006 10:57am
Quoting kjellik74
Back to hedging against futures and options, just so all is aware the interest is always built in to the price of futures and options, so it is not possible to do a pure hedge using these instruments. Only way is to have two brokers with and w/out swap rates, and either have very large accounts or swap back and forward.
ah i see. that a nice input. thank you very much!
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