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Triangular Arbitrage

Quoting Zmax
Hi,

I'm trading only the ineficient pair. Speaking in FPI terms 1 ring is 1 triangulation here. I have many triangulation that have 1 comon pair, that is the pair i'm calculating the value for.
About the swap that's something else it's not related to this strategy i only replayed to burgerking.


Thanks,
Victor
Yes I am using this style in my live account . Works well. You can make money while hedged
Attached Image (click to enlarge)
Click to Enlarge Name: hedge.gif Size: 36 KB
Could you post your indicators
or direct me to where and find them
thank you


Quoting fab4x
Yes I am using this style in my live account . Works well. You can make money while hedged
works well until broker X sees that they are losing a crap load of money and re-adjusts their swap.
Quoting FrankTheTank
works well until broker X sees that they are losing a crap load of money and re-adjusts their swap.
Those rates are based off the country's interest rates. Can't be changed overnight

"The banks decide that. They use a complicated formula that i'm not familiar with. I know that the interest rates for the countries plays into it, as well as demand for the currencies.
Our liquidity providers tell us what to charge or pay on the swap"

"They do not follow a specific schedule. In the past they have gone about 6 months without a change then changed twice in a period of 2 months"



 Quote from broker XXXX
Thats good to hear.

This post scared me
http://www.forexfactory.com/showthread.php?t=107255

and this article on cnbc
http://www.cnbc.com/id/26886826


Seems the recent times are having a negative effect on swap rates and some brokers are naturally passing it on to their customers.
Quoting FrankTheTank
Thats good to hear.

This post scared me
http://www.forexfactory.com/showthread.php?t=107255

and this article on cnbc
http://www.cnbc.com/id/26886826


Seems the recent times are having a negative effect on swap rates and some brokers are naturally passing it on to their customers.
about the swaps Bugerking gave the best answer.

the worst think can happen is not the end of positive spreads but the end of higher leverage. Is it possible or i am paranoic?
What does Swap has to do with triarb?
Quoting qwer1234
In order to do it, we will need an arbitrage calculator, as this opportunities disappear very quickly.
You know, as an trader, analyst and software developer, I cringe over the multiple responses of people looking to do the very same thing. Things that have been done for years. Triangular arbitrage is available, but you have to have the right connectivity. Im certainly not talking about retail connectivity either. Credit lines, and multiple bank feeds are what create the opportunity to use the methodology. Yes you have to have the right equipment as well.

We use a 8 Core 3.6 Ghz dual CPU. We also have a black box to complete the trades. But just so you know.. You can trade correlation with a broker like Oanda, but if you know how, you can ALSO trade triangular. Completely, with anonymity. Get your trading right, quantum analytics will bring out the logic that shows you what to do and how to do it. 99% of the participants here dont yet get it. By the way... you cannot do it through GUI, it has to be an independent API fed box.
To those who are running this (or modification of) system now, how is the performance in this market environment lately?
Quoting fiberangel
To those who are running this (or modification of) system now, how is the performance in this market environment lately?

Any form of arbitrage relies on volatility. I am assuming you are familiar with the current markets status quo...Its a black box.. not a modified application.
Quoting Rockshore
Any form of arbitrage relies on volatility. I am assuming you are familiar with the current markets status quo...Its a black box.. not a modified application.
Yes we run arbitrage, linear and triangular.
Ok, I’m new here and this will be my first post. After some time going over the triangular arbitrage idea, I developed a little system that runs in an old beat up laptop with XP and Excel 2003. It communicates trough the Fix Gateway and is able to place up to 4 confirmed combinations (rings, 3 legs, etc.) per second. It calculates more than 100 currencies real-time and places combinations with positive results automatically. Basically I start the system, sit down, and watch it taking decisions for me. The only input I have to do is when the orders get confirmed in negative do to slippage (normal market movement, latency, last look, etc.).
The only problem I have so far is what to do with this thing? I have been banned from couple of brokerage houses for many reasons and the few others lack of proper liquidity providers.
Sorry Metatraders real triangular arbitrage does not work in those types of video games platforms. Don’t get mad, arbitrage is a function of exchange not trade! I don’t leave positions open or care about interest rates. I’m only looking for the price discrepancies.
I hope somebody has a good idea!
The only one that can say that triangular arbitrage is a risk free investment is someone that has never done it.
Hi,

Cwitts do you send market orders only? I know there are ways to send limit orders (that guarantee the price) and you don't get slipped, do you use any of these?. Do you trade the pure ring A*B = C?
With market orders you are pretty much screwed because if 1 single order fills at a crap price the whole ring dies.
Mr. cwitts..Four trades per second?? You need to be a bit quicker than that, more effectively, in the Real market you need to have performance metrics like below this in order to successfully trade triangular arbitrage. Four trades per second will deplete your account on spread alone, not to mention that once you are in the real market and not through a mousetrap broker you will have commission expenses on top of your latency. Be sure you have the capability to net your trades and not have to reverse them either.

FYA (for your advice) make sure your old pc can handle multiple price feeds through multiple direct connects in a data center, not remotely through internet. It doesnt work. Sorry to dissapoint you.

Also, your application also if using a standard FIX Gateway/engine, and you havent spent atleast $ 10,000 on a ultra high frequency engine, then your efforts are in vain, as the traders who trade triangular will get to EVERY trade before you do.

FYI.. these are REAL performance metrics and solely for our triangular arbitrage module.

16.00.10:765: Triangular Arbitrage END (0 ms) 3298 times <1ms
15.57.09:328: Triangular Arbitrage END (1 ms) 94 times
16.00.04:328: Triangular Arbitrage END (2 ms) 30 times

If your trading Linear arbitrage you should be sure that your performance is well below this.

I wish you the best of luck, contrary to what it may sound like, just offering a bit of advice... as unless your able to cough up rather large expenses an old PC wont handle the computations.




Quoting cwitts
[size=3][font=Calibri]Ok, I’m new here and this will be my first post. After some time going over the triangular arbitrage idea, I developed a little system that runs in an old beat up laptop with XP and Excel 2003. It communicates trough the Fix Gateway and is able to place up to 4 confirmed combinations (rings, 3 legs, etc.) per second. It calculates more than 100 currencies real-time and places combinations with positive results automatically. Basically I start the system, sit down, and watch it taking decisions for me. The only input I have...
  • Post #175
  • Quote
  • Edited 12:35pm Mar 19, 2010 12:18pm | Edited 12:35pm
@Mr. Zmax
I’m not a fan of FPI. I just went through the whole Kreslik thing two days ago and found some incorrect premises that perpetuated the search for a sustainable FPI practice. On the other hand I rather use market orders and if they slip they slip. I rather realize my loss immediately and place new combinations than to dwell on open positions waiting to be filled. For me FPI is another way to buy low and sell high. I might be wrong.

@Mr. Rockshore
Like I said earlier, I’m new in these types of forums. But one of the things I have notice is people criticizing others and then asking them how they do it. I think you are not one of them, because it seems like you already know how to do Triangular Arbitrage and you won’t gain anything from bashing my technique, right?

But I’m going to level with you. I can place thousands of trades in a second, that’s a given and I don’t have to make a complex system to do that. I need to clarify you, that four combinations (rings) per second are not the same as 4 trades per second. Each combination is a Triangular Arbitrage opportunity in itself with the profits deposited into my account. Each combination needs to be calculated, executed and confirmed for others to be placed. When you refer to spreads depleting my account I can only imagine that you are implying that I am trading FPI, but no, I’m doing Triangular Arbitrage.

The more feeds you have not necessarily translate into profits. Obviously if you are just measuring the market, the more feeds you have, the more price discrepancies you will find and the happier your hopes and dreams are going to be. But when you start executing with real money you will bump into slippage, delays, latency, last look and other well known problems. Then you will ask yourself, why in practice I have so much arbitrage and why I get so much slippage with real money?

Simple your data feed does not reflect the executable prices of the real market. That’s when probably you decided to create an arbitrage calculator for everyone to use.

My strategy is much simpler. With a DSL connection I can connect to Currenex with almost no delay through FIX. Actually, from the many trades with slippage none, I want to be clear, none, have been due to connectivity. I analyze and place my orders in fractions of a second and my codes are so simple that can run in my old beat up laptop. Trust me to avoid slippage we thought of doing a collocation in NY, but it was not even necessary. I had to strip my algorithm from useless calculations to make it work more efficient. My best guess is that behind all the layers of code you are using to filter and process data, you need to blame connectivity for the delay you are experiencing.

It seems a little simplistic to think that for $10,000.00 I can solve the problem of traders getting before I do. My system gets what it sees in real-time. I know that I don’t have access to the best prices and I only get to see my broker’s liquidity, but I assure you the other traders doing arbitrage are not my problem. As a matter of fact I thought you were one of them.

I exchange money. I don’t open rings and wait for the market to improve to close them. I execute combinations that are settled T+2 and then the money is ready in my account (the way it should be). They are self netted and I don’t have to close any positions.

Quote:

“FYA (for your advice) make sure your old pc can handle multiple price feeds through multiple direct connects in a data center, not remotely through internet. It doesnt work. Sorry to dissapoint you.”

Two things from your comments:

Multiple direct connects in a data center sounds like home made slippage. Lots of price discrepancies (arbitrage opportunity) but slippage and the other don’t mess with my old laptop. LOL. I don’t use it for the market anymore but is still around!

PS. I don’t trade play money.
Hi,


I also tested on a FIX broker in this way:

Starting with let's say 100k (test lot)

SELL EURGBP - 100k eur* EG.bid(0.90865) => 90865 gbp
SELL GBPUSD - 90865 * GU.bid(1.50125) => 136411 usd
BUY EURUSD 136411 / EU.ask(1.36397) => 100010 eur

So i placed 3 market orders with sellGB(100k) sellGU(136411) buyEU(100010) and i should have had a profit of 10eur no? But what happened is my price changed 1 pip on EG,1 pip GU and + commisions and i got -10eur lol.
So i thought there is no way doing this sending 3 market orders all at once. And you need a strategy for placing the orders, sending 2 orders first than closing them with the 3-rd and other things. (this way it worked)

Also, CX is a crap broker from my point of view. There are banks("liquidity providers") like CBS and others that have unlimited time to confirm a filled trade - ex: you bought from them and they wait - if price is going down - you get a reject if price is going up you get a fill (lastlook overused). If you have the bad luck to get a lastlooker on the counterparty you loose for sure.
So overall you were positive or more negative on cx lol? Maybe your pool there doesn't contain CBS, i tried the same thing and was always slipped - i had to look for +5pips profit rings to get 1pip if lucky, and that happens very very rare, doesn't worth.

Please let me know,
Zmax
Quoting cwitts
@Mr. Zmax
I’m not a fan of FPI. I just went through the whole Kreslik thing two days ago and found some incorrect premises that perpetuated the search for a sustainable FPI practice. On the other hand I rather use market orders and if they slip they slip. I rather realize my loss immediately and place new combinations than to dwell on open positions waiting to be filled. For me FPI is another way to buy low and sell high. I might be wrong.
Can you explain what do you mean by 'FPI' ?
Quoting cwitts
I exchange money. I don’t open rings and wait for the market to improve to close them. I execute combinations that are settled T+2 and then the money is ready in my account (the way it should be). They are self netted and I don’t have to close any positions.
I don't understand this bit. Can you give an example what exactly are you doing?
Quoting aktur
Can you explain what do you mean by 'FPI' ?

I don't understand this bit. Can you give an example what exactly are you doing?
FPI :

http://kreslik.com/forums/viewtopic....er=asc&start=0

Regards
Ludo.
Mr. Zmax;

I gain nothing by criticizing, in fact it could be quite negative if used incorrectly. I'm pointing our the multiple issues we went through as well before completion and implementation. Mr. Cwitts is merely just finding them, and although he says he does trade real money, there are a few things which cause the concern. I am all for the little guy believe me, If I could offer any sort of insight I'd do it gladly.

Yes we trade arbitrage all day long in multiple formats, linear, triangular and through market making just like the liquidity providers do.. We are liquidity providers, just from a buy-side customer perspective.

To verify this look at the most recent issue of e-forex and the article on Direct Market Access.

Which brings me to one of the pieces of criticism.if your using an opaen source engine for FIX then he has a 15 millisecond inherent latency...I guarantee this... As the FIX engine we have was developed by the very same developers who developed QuikFIX.. And the reason they developed their own was because of this latency. So if you think you dont have latency you should do some extensive performance profiling on packets and kernel objects to know exactly how long it takes you to receive the quote and respond. If you use wireshark it will give you the time stamp on the incoming messages for your quotes. Combine the efforts to measure your latency there is some.

With last look, we have no liquidity providers that have last look We remove them from our Liquidity on the network side.

All of this is a benefit of Direct Market Access, not having a brokerage to control or manage the details till long after the trades are executed.

Multiple networks benefits us, the permutations for Triangular grows with the number of price quotes... If your able to manage CEP (complex event processing) with multi connects (direct, not through internet) then the price aggregation shows you best price available.... This itself creates more linear and triangular opportunities as your best pricing in the aggregation is slimmer... spreads are typically less than 2 10ths of a pip in the majors... a half a pip out of parity creates opportunities, trade them!



uote=cwitts;3568260]@Mr. Zmax
I’m not a fan of FPI. I just went through the whole Kreslik thing two days ago and found some incorrect premises that perpetuated the search for a sustainable FPI practice. On the other hand I rather use market orders and if they slip they slip. I rather realize my loss immediately and place new combinations than to dwell on open positions waiting to be filled. For me FPI is another way to buy low and sell high. I might be wrong.

@Mr. Rockshore
Like I said earlier, I’m new in these types of forums. But one of the things I have notice is people criticizing others and then asking them how they do it. I think you are not one of them, because it seems like you already know how to do Triangular Arbitrage and you won’t gain anything from bashing my technique, right?

But I’m going to level with you. I can place thousands of trades in a second, that’s a given and I don’t have to make a complex system to do that. I need to clarify you, that four combinations (rings) per second are not the same as 4 trades per second. Each combination is a Triangular Arbitrage opportunity in itself with the profits deposited into my account. Each combination needs to be calculated, executed and confirmed for others to be placed. When you refer to spreads depleting my account I can only imagine that you are implying that I am trading FPI, but no, I’m doing Triangular Arbitrage.

The more feeds you have not necessarily translate into profits. Obviously if you are just measuring the market, the more feeds you have, the more price discrepancies you will find and the happier your hopes and dreams are going to be. But when you start executing with real money you will bump into slippage, delays, latency, last look and other well known problems. Then you will ask yourself, why in practice I have so much arbitrage and why I get so much slippage with real money?

Simple your data feed does not reflect the executable prices of the real market. That’s when probably you decided to create an arbitrage calculator for everyone to use.

My strategy is much simpler. With a DSL connection I can connect to Currenex with almost no delay through FIX. Actually, from the many trades with slippage none, I want to be clear, none, have been due to connectivity. I analyze and place my orders in fractions of a second and my codes are so simple that can run in my old beat up laptop. Trust me to avoid slippage we thought of doing a collocation in NY, but it was not even necessary. I had to strip my algorithm from useless calculations to make it work more efficient. My best guess is that behind all the layers of code you are using to filter and process data, you need to blame connectivity for the delay you are experiencing.

It seems a little simplistic to think that for $10,000.00 I can solve the problem of traders getting before I do. My system gets what it sees in real-time. I know that I don’t have access to the best prices and I only get to see my broker’s liquidity, but I assure you the other traders doing arbitrage are not my problem. As a matter of fact I thought you were one of them.

I exchange money. I don’t open rings and wait for the market to improve to close them. I execute combinations that are settled T+2 and then the money is ready in my account (the way it should be). They are self netted and I don’t have to close any positions.

Quote:

“FYA (for your advice) make sure your old pc can handle multiple price feeds through multiple direct connects in a data center, not remotely through internet. It doesnt work. Sorry to dissapoint you.”

Two things from your comments:

Multiple direct connects in a data center sounds like home made slippage. Lots of price discrepancies (arbitrage opportunity) but slippage and the other don’t mess with my old laptop. LOL. I don’t use it for the market anymore but is still around!

PS. I don’t trade play money.[/quote]
Rockshore,

I don't understand something, this DMA is basicaly connecting all the price feeds from 12 or more brokers (number doesn't matter). You say FIX takes 15seconds for processing - how is DMA connected to these brokers if not with FIX, most of the ECNs use FIX? Also all these brokers are not in the same facility so you need a private line to them from the place where DMA server is, no?
If you have EBS from London (stupid example because EBS has in servers in NY too) and CX from NY you get from start 1ms ping to CX and 35ms ping to EBS ..the feed from EBS will be delayed and if i trade from london i get the price before you lol. I don't understand how and why you think you get first on the price with the DMA... Please explain, i'm very curious and interested about this.


Thanks,
Zmax
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