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My Own Broker Arbitrage

  • #81
  • Dec 21, 2011 7:55pm Dec 21, 2011 7:55pm
Quoting Ronald Raygun
@deankenny21

See the video at the beginning of this thread. That's basically what it will look like. And you can already see how much faster it is than Fielder's arb--and according to the professional programmers, my method is still slow.

I'm working on this as much as I can shooting for a release by New Years.

The main problem I'm having is reducing the time it takes to execute a full arb trade. Currently it's 8 seconds--not fast enough.

Hang tight!
good job http://www.forexfactory.com/images/icons/icon14.gif looking foward to see this working and share with us, very2 hope u can make it.btw http://www.forexfactory.com/images/icons/icon3.gifcan we have the soft protipe so we can help test n develope together to find if anything still run wrong beside slow.so we can make this soft perfect for everybody.thx b4 http://www.forexfactory.com/images/icons/icon10.gif
  • #82
  • Dec 21, 2011 8:31pm Dec 21, 2011 8:31pm
Quoting Ronald Raygun
@deankenny21

See the video at the beginning of this thread. That's basically what it will look like. And you can already see how much faster it is than Fielder's arb--and according to the professional programmers, my method is still slow.

I'm working on this as much as I can shooting for a release by New Years.

The main problem I'm having is reducing the time it takes to execute a full arb trade. Currently it's 8 seconds--not fast enough.

Hang tight!
8 seconds seems like an eternity. How is this possible?
  • #83
  • Dec 21, 2011 9:25pm Dec 21, 2011 9:25pm
Quoting FXEZ
8 seconds seems like an eternity. How is this possible?
Currently, the code sends one trade order to the bid slave, and waits for the response, then it sends the second trade order to the ask slave. I'm working out a way to send the orders and not wait for confirmation. I figure I'd opt to get the confirmation when the next cycle starts.
  • #84
  • Dec 21, 2011 11:12pm Dec 21, 2011 11:12pm
Quoting Ronald Raygun
Currently, the code sends one trade order to the bid slave, and waits for the response, then it sends the second trade order to the ask slave. I'm working out a way to send the orders and not wait for confirmation. I figure I'd opt to get the confirmation when the next cycle starts.
All the best Ronald and happy holidays to all!
Forex brokers real time discount - visit Abundance trading group. com
  • #85
  • Dec 21, 2011 11:49pm Dec 21, 2011 11:49pm
Quoting Ronald Raygun
Currently, the code sends one trade order to the bid slave, and waits for the response, then it sends the second trade order to the ask slave. I'm working out a way to send the orders and not wait for confirmation. I figure I'd opt to get the confirmation when the next cycle starts.
If you can use your composite quote to determine which is the slow quote (the bid or the ask), and then get a confirmed execution on this first order and only then execute on the second, this might not be so bad, so long as the 2nd quote hasn't moved adversely to the arb since the first was sent.

However as we know markets move and the concept of the arb implies simultaneous execution locking in both prices. The realities of the MT4 dealers may require a firm confirmation on the slow quote before executing on the fairly priced offsetting quote. You might also factor in synthetic pairs for (the initial or) offsetting position if they are more favorable, though you add an additional transaction with all the caveats of an additional trade + confirmation. I admire your persistence so don't let my relative pessimism regarding profiting from the final product of this project prevent you from pursuing it further.

If one or more dealer consistently uses last look on the orders they may need to be removed from the pool as trading with them with this type of strategy will be no win. The essence of this strategy turns you (the trader) into the last looker and as a result, the broker may opt to follow the same advice as presented in the previous sentence, with regards to removing the trader (you) from their pool.
  • #86
  • Dec 22, 2011 3:47pm Dec 22, 2011 3:47pm
Quoting nondisclosure00
You're talking distance between the 2 brokers prices, right?
Right
  • #87
  • Dec 22, 2011 8:15pm Dec 22, 2011 8:15pm
Things you gotta think about:

1. Are you 'perceiving' an arb when it doesnt exist - (ie GO/Pepperstone feed freezes at the moment) - consider using a quorum of brokers, and make sure the feed is still fluid on this and other pairs
2. I am assuming you ar advocating opening/closing on diverse brokers, then waiting for the positions to build (hedged, broker 1 +ve, broker 2 -ve) until a suffcient gap opens (so you dont get accused of hyper scalping) or until a 'hedge reversal' arb presents itself
3. Margin/Equity management - Allthough the OVERALL position is hedged, you will get a mismatch in equity on each side of the hedge. Over time, multiple concurrent open arb's may flatten the equity difference, but eventually to build up will reach limits where you have to address margin usage. In a hurry you could always just close the arb positions (not optimal)
4. You could consider a 'higher' level equity management (meaning more complex) whereby you allow closing a hedged broker 1, by executing on broker 2 -(ie keeping positions open persistently) The need for the equity management is increased, but then you have ultimate choice on which broker pair to use on each trade - and dont have to worry about closing each hedge in profit. The problems (and probably solutions_) are similar in each case, even if it initially appears more complex
5. Use sockets - concurrent execution is easy - you have to be careful of concurrent execution as slippage will be exacerbated. When you wait for confirmation you will be aware of slippage on 1 side and can attempt to compensate the second leg (by rechecking all broker prices) . When you attempt to execute concurrently you can get 2 lots of slippage which then become 'locked' into the arb hedge.
Conventional 'institutional' arbitrage often relies on LIMIT orders (zero slippage - you just 'miss'), and consecutive (not concurrent) execution, not MARKET orders - it is easy argue that MARKET orders are exposed to slippage in any case, they will execute, and the penalty on poor slow execution is higher than the saving made in re-examining all brokers for a better leg 2 price - so you might be better to execute concurrently.

I am not saying it will not work - just that you need to look at the 'big picture'. If you can build a basic arb strategy that manages to build a net +ve hedge 'pool' of arbs than you are well on the way
  • #88
  • Dec 22, 2011 8:38pm Dec 22, 2011 8:38pm
Quoting ianj1
Things you gotta think about:

1. Are you 'perceiving' an arb when it doesnt exist - (ie GO/Pepperstone feed freezes at the moment) - consider using a quorum of brokers, and make sure the feed is still fluid on this and other pairs
2. I am assuming you ar advocating opening/closing on diverse brokers, then waiting for the positions to build (hedged, broker 1 +ve, broker 2 -ve) until a suffcient gap opens (so you dont get accused of hyper scalping) or until a 'hedge reversal' arb presents itself
3. Margin/Equity management - Allthough the OVERALL...
good post an only your 8th. Are you a rouge programer from jason's staff?
lol

jk welcome to FF
  • #89
  • Dec 22, 2011 8:54pm Dec 22, 2011 8:54pm

  1. The broker's prices are refreshed immediately before sent from the slave to the master. By the time the prices are decided on for a trade, about 3 + 2 * # of brokers miliseconds have passed. By the time it's displayed on the chart, it's closer to 11 + 7 * # of brokers miliseconds. The prices are fresh, and there is a significantly small window before they are refreshed.
  2. I short the broker with the high bid, and long the broker with the low ask. Close the trades when the resulting spread (short broker's ask and long broker's bid) is back in normal territory--as defined by inputs for the EA.
  3. Once the spread reaches normal levels, it's a good time to close the trade. Some brokers have arb filtering / detection scripts, I would merely need to hold the trade a little longer--about 1-2 hrs--before closing it. My net profit will be the same, the difference is the margin levels between brokers. Unlike time-based 'arbitrage' where trades have to be closed within seconds of being opened. Margin usage woul merely require that accounts are 'refreshed' periodically.
  4. All I'd be doing is transferring from one broker to another. Adds to my spread + commissions cost.
  5. I'm well aware of the many infrastructure limitations, which means the best time to profit for this EA/script will likely be after events or instances where different banks become overexposed / underexposed to the currency.
  6. As for making it work, this is certainly not institutional grade code. Nondisclosure007 has seen the alpha version, and can verify how inefficient it is. In spite of the inefficiency, it should still be able to pull profits--especially if I'm able to manually enter arbs. Granted, slippage is through the roof, but I still eek out a net 2-3 pip profit.


Quoting ianj1
Things you gotta think about:

1. Are you 'perceiving' an arb when it doesnt exist - (ie GO/Pepperstone feed freezes at the moment) - consider using a quorum of brokers, and make sure the feed is still fluid on this and other pairs
2. I am assuming you ar advocating opening/closing on diverse brokers, then waiting for the positions to build (hedged, broker 1 +ve, broker 2 -ve) until a suffcient gap opens (so you dont get accused of hyper scalping) or until a 'hedge reversal' arb presents itself
3. Margin/Equity management - Allthough the OVERALL...
  • #90
  • Dec 23, 2011 12:40am Dec 23, 2011 12:40am
It will pull profits. Yes, the code could use some improvements and it will get it.

ianj1, have you Arb'd on retail before?

Quoting ianj1
Things you gotta think about:

1. Are you 'perceiving' an arb when it doesnt exist - (ie GO/Pepperstone feed freezes at the moment) - consider using a quorum of brokers, and make sure the feed is still fluid on this and other pairs
2. I am assuming you ar advocating opening/closing on diverse brokers, then waiting for the positions to build (hedged, broker 1 +ve, broker 2 -ve) until a suffcient gap opens (so you dont get accused of hyper scalping) or until a 'hedge reversal' arb presents itself
3. Margin/Equity management - Allthough the OVERALL...
  • #91
  • Dec 23, 2011 1:21am Dec 23, 2011 1:21am
Quoting nondisclosure00
It will pull profits. Yes, the code could use some improvements and it will get it.

ianj1, have you Arb'd on retail before?

No - not retail

But i have on institutional - quite a lot - and i know what the issues are !
  • #92
  • Dec 23, 2011 1:31am Dec 23, 2011 1:31am
I've been doing it on retail and have had success. Nothing to write home about, but have had success.

Quoting ianj1
No - not retail

But i have on institutional - quite a lot - and i know what the issues are !
  • #93
  • Dec 23, 2011 7:50pm Dec 23, 2011 7:50pm
Quoting FXEZ
If one or more dealer consistently uses last look on the orders they may need to be removed from the pool as trading with them with this type of strategy will be no win. The essence of this strategy turns you (the trader) into the last looker and as a result, the broker may opt to follow the same advice as presented in the previous sentence, with regards to removing the trader (you) from their pool.
My assumption is that nearly all BROKERS (certainly retail MT4 brokers) will last look - its the ones that are slow that are the problem (most people don't realise that 90% of the prices on Currenex are last looked and even the last bastion of institutional NON last look brokers - Hotspot - is suspected to offer limited last looking to some privileged liquidity providers) Of course there are techniques to reduce the likelyhood of a last look, but they will not work on an MT4 broker (in fact they will not work in most cases unless you are talking about accounts in excess of $100k)

Rumour has it that LMAX does not last look, but i haven't established that as fact. The top two tier one trading platforms, EBS & Reuters do NOT last look - but they are way beyond any retailer traders reach

As i said at the start the best you can hope for is a quick efficient last look

Also, don't let anyone fool you into thinking institutional platforms (or rather the underlying liquidity providers) don't play games as well. I KNOW that liquidity providers have been known to 'sour' an execution by delaying the execution if they think they are being gamed.
  • #94
  • Edited 8:20pm Dec 23, 2011 8:03pm | Edited 8:20pm
I would confirm that the best way to lose liquidity is to aggressively arb broker platforms. Many platforms are supposed to be anonymous, and the liquidity provider cannot identify you by name, but if they see suspicious or uncomfortable flow they can and may request that their prices are not offered to the owner of that account (you !) again.

Over a period of time your liquidity WILL dry up (the account is effectively 'burned' out) , and in rare cases you may be thrown off the platform entirely (albeit quite rarely - a lack or prices on the account is usually enough)

In retail, i EXPECT that liquidity providers will NOT try to pick off individual toxic flow - unless you are a large volume player (think 1000+lots per day), but word may get back to the broker leading to adverse consequences

With luck, as a retail trader, you might stay under the radar and get away with it

Dunno if i can post a URL but if it comes across take a peek at the blog of Xavier Alexandre - from a guy i respect who is VERY knowledgable on the subject

"Algos for the masses" (try in google)

(http://xavalex.wordpress.com/2011/11...or-the-masses/)

"and sophisticated smaller entities traders, who, let us face it, are mostly glorified arbitragers (yes yes this still happens, would you believe it)."
  • #95
  • Dec 23, 2011 8:45pm Dec 23, 2011 8:45pm
Quoting Ronald Raygun
@deankenny21

The main problem I'm having is reducing the time it takes to execute a full arb trade. Currently it's 8 seconds--not fast enough.

Hang tight!
I'll try and dig some code out to use sockets from MQL if you want - there are particular threading concerns within MT4 - especially if you want to emit a feed AND respond to order processing requests in a timely manner. I don't have any reusable code OUTSIDE of Mt4 - my stuff is all Java and part of a different system.

Of course this might sound like teaching a grandmother to suck eggs ..
  • #96
  • Dec 23, 2011 9:13pm Dec 23, 2011 9:13pm
Quoting ianj1
I'll try and dig some code out to use sockets from MQL if you want - there are particular threading concerns within MT4 - especially if you want to emit a feed AND respond to order processing requests in a timely manner. I don't have any reusable code OUTSIDE of Mt4 - my stuff is all Java and part of a different system.

Of course this might sound like teaching a grandmother to suck eggs ..
I appreciate your overall concern for this project. Should your predictions come true, I'll still have a tool to aggregate best bid/ask from various brokers and that in itself will add significant value to my existing trading.
  • #97
  • Dec 23, 2011 9:25pm Dec 23, 2011 9:25pm
As you'll note on the thread, you're not the first one to give me such conclusions. The beauty of my youth is that I'm too naive to know it can't be done.
  • #98
  • Dec 23, 2011 10:36pm Dec 23, 2011 10:36pm
I did this about two years ago. This is when some of the more shady brokers started offering an instrument based upon currency futures.
These instruments were supposed to move exactly in time with the live CME currency futures, but I found that there were quite a few timing issues that I took full advantage of.

I wrote software to find the arbitrage opportunities, and towards the end, only opened up one leg of the trade, as I knew where it would end up going once the broker rates caught up with the CME rates. I know some people might call this cheating, but the brokers were quite clear that their instrument was only based upon the CME futures, not the acutal futures themselves, and that the prices may be different.

I couldn't get it to work profitable with the normal currencies though. The slow execution and constant slippage was just too hard to deal with.
  • #99
  • Dec 23, 2011 10:58pm Dec 23, 2011 10:58pm
Quoting Ronald Raygun
As you'll note on the thread, you're not the first one to give me such conclusions. The beauty of my youth is that I'm too naive to know it can't be done.
I am not trying to be overly negative - i have been toying with the idea of trying it myself - and as you said you get a decent retail aggregator as a side affect (I plan on running strategies outside of Mt4 and just executing on them as an aggregated pool)

My real interest is in cross broker equity/position/margin management once the initial arbs have been taken - alongside higher volumes to allow some level of netting - i reckon this stuff might be needed to make it profitable - perhaps i should see if walking is possible before trying to run ..

I am sure you can see why i am also interested in economical broker to broker fund transfers (e.g. B2B on Pepperstone, Alpari, IBFX etc) In the institutional world you would simply rely on the prime broker to net positions. If you cannot manage the margin/equity equalisation effectively then equalising by funding could become pretty critical

I'll be watching carefully - interested in seeing if walking is possible - then i might get my trainers out ... meanwhile if there is anything i can add ..
  • #100
  • Dec 23, 2011 11:07pm Dec 23, 2011 11:07pm
Quoting ianj1
I am not trying to be overly negative - i have been toying with the idea of trying it myself - and as you said you get a decent retail aggregator as a side affect (I plan on running strategies outside of Mt4 and just executing on them as an aggregated pool)

My real interest is in cross broker equity/position/margin management once the initial arbs have been taken - alongside higher volumes to allow some level of netting - i reckon this stuff might be needed to make it profitable - perhaps i should see if walking is possible before trying to run...
In terms of equity management, I agree the margin requirements increase significantly, almost to the point where a prime brokerage is more desirable. For the purpose of straight arbitrage, I'm setting up each account so they can individually suffer a 1,000 pip drawdown. I'm pretty sure I can't screw up that much without fixing it.
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