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Creating a Arbitrage Expert

  • #1
  • First Post: Sep 19, 2015 6:59am Sep 19, 2015 6:59am
Hi All,

I've been working on a Program that can get fast(0.00001ms) broker's Price Feed since last 3 week, and nice i'm done creating the program, but, my main problem is that i'm not a Arbitrage trader, so i know less about it...

I want to know how to code a robot that arb between seconds, but don't know what to tell it to check for before making its trades..

I'm good at Programming, just don't know what to check for when it comes to making entries and exits..

Please, can you share your experience, thoughts or strategy for trading Arbitrage between brokers?
I would be glad to see great supports here on FF..

Thanks,
Noobshow..
  • #2
  • Sep 19, 2015 9:12am Sep 19, 2015 9:12am
I think you have to look for situations where the Bid price of lets say the EURUSD on Broker A is bigger than the Ask price of Broker B. Then you can short Broker A and buy Broker B.
  • #3
  • Sep 19, 2015 2:41pm Sep 19, 2015 2:41pm
You must have datafeed from 2 brokers. One is a fast broker and the other is a slow broker. Each 20 milliseconds you calculate the difference between the bid price. You see a gap. Once the gap is bigger than 0.5 pips you can trade. The fast broker give you the direction. Trades are token in the slow broker.
  • #4
  • Sep 20, 2015 3:40am Sep 20, 2015 3:40am
Quoting TimeRider
I think you have to look for situations where the Bid price of lets say the EURUSD on Broker A is bigger than the Ask price of Broker B. Then you can short Broker A and buy Broker B.
I think my type of Arbitrage is called One-Leg Arbitrage(I'm not sure)...
My own won't be having two brokers...
I will only be using a fast broker's Price against the slow broker's latency...

Thanks for your nice reply...
  • #5
  • Sep 21, 2015 8:55am Sep 21, 2015 8:55am
Ah interesting. So you actually trade like Milanie said. Which brokers do you use for that?
  • #6
  • Sep 21, 2015 9:30am Sep 21, 2015 9:30am
You won't be able to withdraw your profit with the majority of the brokers that have those slow servers that you can take advantage of the latency with. They know their server speed is crap so they will accuse you of latency arbitrage and will forfeit all of your profit. Even the regulators like FCA of UK won't listen to you.

Take a look at this case and you will see:

http://www.forexfactory.com/showthread.php?t=509987
Make your losses in demo. Earn your profits live.
  • #7
  • Sep 21, 2015 1:08pm Sep 21, 2015 1:08pm
Quoting Forexia
You won't be able to withdraw your profit with the majority of the brokers that have those slow servers that you can take advantage of the latency with. They know their server speed is crap so they will accuse you of latency arbitrage and will forfeit all of your profit. Even the regulators like FCA of UK won't listen to you. Take a look at this case and you will see: http://www.forexfactory.com/showthread.php?t=509987
Very true, most Brokers don't accept these kind of strategies, primarily because you're not really trading, your are purely trying to take advantage of a difference in price updates!
  • #8
  • Sep 21, 2015 4:19pm Sep 21, 2015 4:19pm
Quoting insideman
{quote} Very true, most Brokers don't accept these kind of strategies, primarily because you're not really trading, your are purely trying to take advantage of a difference in price updates!
Well it should really be allowed. After all the trader is still trading; it's not his/her job to make sure the price he/she is trading on is the most correct or update one or whatever; all he/she sees is a price. As long as the trader thinks trading upon this price will yield him/her a profit he/she has every right to trade on it and reap any profit resulting from that trade. If they can stop-hunt and requote on us, why do we have to have our profit forfeited because of their crappy server which was really set on purpose to be slow in the first place so we can lose?

In "rea life" example, if you see a store that has apple's price updated to reflect the upcoming drought to be $0.78 but another store's apple price is still at $0.59. If you are able to buy a whole bunch of apples at store B at $0.59 and sell them at $0.66 and make a profit, that profit is all yours. Nobody will come to you and have the right to forfeit all of the profit. So why should the forex market be any different?
Make your losses in demo. Earn your profits live.
  • #9
  • Oct 26, 2015 1:43pm Oct 26, 2015 1:43pm
Quoting Forexia
{quote} Well it should really be allowed. After all the trader is still trading; it's not his/her job to make sure the price he/she is trading on is the most correct or update one or whatever; all he/she sees is a price. As long as the trader thinks trading upon this price will yield him/her a profit he/she has every right to trade on it and reap any profit resulting from that trade. If they can stop-hunt and requote on us, why do we have to have our profit forfeited because of their crappy server which was really set on purpose to be slow in the...
That's not really the case though, what you're saying is no different to someone using inside information to trade since you know where the market has already gone due to your quicker price feed.

Its a known fact that Mt4 cannot be as fast as a stream through a FIX connection, this means latency arbitrage opportunities exist and Brokers are simply not willing to let people trade risk free.


Also, if you don't like requotes you should look to trade through Market Execution.
  • #10
  • Oct 28, 2015 11:33am Oct 28, 2015 11:33am
Quoting insideman
{quote} That's not really the case though, what you're saying is no different to someone using inside information to trade since you know where the market has already gone due to your quicker price feed. Its a known fact that Mt4 cannot be as fast as a stream through a FIX connection, this means latency arbitrage opportunities exist and Brokers are simply not willing to let people trade risk free. Also, if you don't like requotes you should look to trade through Market Execution.
Done building the expert since a month and some weeks and it is making 80-90%+ Profit on Demo and Live account...
  • #11
  • Oct 30, 2015 8:52am Oct 30, 2015 8:52am
Please keep in mind that such an Expert Advisor may work, but you are going to get banned from the slower broker because you are stealing money to them, expecially if it is a Market Maker broker. They will see you are making money and they are paying for you. Money should come from somewhere, and with their software they will surely catch your strategy
  • #12
  • Oct 30, 2015 2:39pm Oct 30, 2015 2:39pm
Quoting FoxTrade85
Please keep in mind that such an Expert Advisor may work, but you are going to get banned from the slower broker because you are stealing money to them, expecially if it is a Market Maker broker. They will see you are making money and they are paying for you. Money should come from somewhere, and with their software they will surely catch your strategy
I use ECN, no Market-Maker here, i know a bit of their rules .
  • #13
  • Oct 30, 2015 3:11pm Oct 30, 2015 3:11pm
As long as you don't have colocation to your broker servers and/or a faster/better peering than them (as their LP/fx quotes), it would be really hard to beat them in this retail latency game from your home computer.
Slippage is also a factor.
But maybe there are slow brokers out there who don't understand this game?
I doubt it.
  • #14
  • Oct 30, 2015 3:21pm Oct 30, 2015 3:21pm
It is how arbitrage can be done in it's simplest way.

You can monitor the "slower" broker, monitoring many other brokers: making a statistical analisys by recording real time price syou can spot the slower broker so you can "predict" what the price will be.
  • #15
  • Oct 30, 2015 4:01pm Oct 30, 2015 4:01pm
Arbitrage is the best strategy ever! It' s a sure win with no risk, and in theory you can make a fortune in no time. But very hard to work today....even if you hit them with HFT EA it's very hard to withdraw the profits. Brokers have become smarter and now they use special software to monitor their clients and compare the timestamps on tickets vs timestamps on the tick data.... so they know if some one is exploiting their latency....... But I can tell you what we did back in the days when retail FX was still in its infancy and some retail brokers used to offer guaranteed fixed spreads with instant execution.
We find broker with lagging prices deposit 1000 $ 1 day before NFP release, then on the NFP release hit them as many times as possible with 100:1 leverage and then submit withdrawal for 3-5K$ and leave only 1k in the account until the next NFP. and keep doing that until they catch you and close the account.
This thing use to work for a few months, then the word was out the game was over. Brokers started to widen spreads, delay execution and monitor their client flow closely. So no more arbitrage.....
Maybe you can still find some bucketshops where you can do this, but I doubt they will allow you to withdraw the money.
  • #16
  • Nov 10, 2015 4:00am Nov 10, 2015 4:00am
Quoting insideman
{quote} That's not really the case though, what you're saying is no different to someone using inside information to trade since you know where the market has already gone due to your quicker price feed. Its a known fact that Mt4 cannot be as fast as a stream through a FIX connection, this means latency arbitrage opportunities exist and Brokers are simply not willing to let people trade risk free. Also, if you don't like requotes you should look to trade through Market Execution.
Well that's what I am saying those Market Maker brokers shouldn't really be there; I mean you can't set up a shop on purpose just to make sure people lose money but at the same time providing no compensations for it. Casinos we know have designed their games with winning odds in favour of the dealer but at the same time they are providing an entertainment to us, cool drinks, fun atmosphere, great food, nice hotel rooms; we are basically losing in casinos to buy those entertainment to have fun. But those MM brokers? They are taking our money and make us play a system that they have designed for us to lose our money to them on purpose but at the same time they are not providing anything to us in return. When was the last time that those brokers provided us a beautiful room, nice drinks and etc. for us to trade?

What we are doing with them is not a bona fide business relationship; what we are having with those MM brokers is a gratuitous relationship in that we are basically paying them money out of our free will as if they are a charity case. So in turn, we don't owe them no nothing, no obligation to be fair. When they are requoting, stop-hunting, delay quoting us, they know our trades, our orders beforehand too so they are trading on confidential and inside information too that they are not supposed to have knowledge either and they are using that to trade to their advantage, taking our money. So WHY can't we have arbitrage on server latency to make our money? And besides server latency is NOT guaranteed to always win. There are chances that the latency no longer exists by the time your order went through and we would've lost so it's not really inside information per se especially that it's actually public knowledge. Anybody with any software can have access to these information and it's not our problem that those dealers' price is somehow slower; that's their server's problem. They don't like it? Fix their servers!! Don't blame it on us traders when their servers are crap and they choose to use a crap system. Trading is a cut-throat business. You either kill or be killed and there is no place for second best. WHY should us traders be always second best so those dealers can make riskless profit at our expense?
Make your losses in demo. Earn your profits live.
  • #17
  • Edited 5:37am Nov 10, 2015 5:23am | Edited 5:37am
Quoting Forexia
{quote} Well that's what I am saying those Market Maker brokers shouldn't really be there; I mean you can't set up a shop on purpose just to make sure people lose money but at the same time providing no compensations for it. Casinos we know have designed their games with winning odds in favour of the dealer but at the same time they are providing an entertainment to us, cool drinks, fun atmosphere, great food, nice hotel rooms; we are basically losing in casinos to buy those entertainment to have fun. But those MM brokers? They are taking our money...
Retail fx brokers definitely provide service. Without them and without platforms like mt4, you, me and 99% of the people would never be able to trade fx.(unless you have millions of risk capital to establish relationship with prime broker/bank). Retail fx is a parallel market created for small traders and it only mimics the real market in terms of quotes. Most of the orders never leave the "house" even if you broker claims to be ECN, STP......it's mostly marketing. And in retail FX your broker is always your counterparty.
So, If they allow even a very small arbitrage opportunity, they will go out of business in no time! Some large traders will hit them immediately with huge orders....and the broker will go broke. That's why every single fx broker has a clause in the term and conditions agreement, where they reserve the right to refuse to pay profits made by arbitrage/latency trades. This is all normal and can be expected. This is how the system works......at the moment.

But of course we have the other problem - because of the potential quick profits, this business attracts a lot of dishonest and greedy people who do not want to play fair, and use all types of tactics to cheat and steal money from their customers. ( artificial requotes, freezing, abnormal/artificial slippage......even stop hunting) But in recent years we see a lot of improvement. Mainly because of the strong demand for better service from traders, and the pressure from the regulators..
Also the internet and the advance of social media play a key role.(self regulation) People can share information very quickly today and if someone is cheating, very soon the whole trading community will know about this. So the reputation of this broker/cheater will be gone in no time.
I think that today a lot of the worst bucket shop practices are gone .
And I suspect that at some point, spot fx trading will have to move into regulated exchanges.(centralization) There are already plans for this in Europe and the USA.
  • #18
  • Dec 3, 2015 8:44pm Dec 3, 2015 8:44pm
Quoting alphaomega
{quote} Retail fx brokers definitely provide service. Without them and without platforms like mt4, you, me and 99% of the people would never be able to trade fx.(unless you have millions of risk capital to establish relationship with prime broker/bank). Retail fx is a parallel market created for small traders and it only mimics the real market in terms of quotes. Most of the orders never leave the "house" even if you broker claims to be ECN, STP......it's mostly marketing. And in retail FX your broker is always your counterparty. So, If they allow...
Yeah I guess when you put it that way, retail fx brokers are like casinos that don't provide you drinks and nice food. And not only that, they make you play on broken slot machines that that they know are broken but refuse to fix it so when you win, they don't allow you to walk away with your winnings. Yeah that's one helluva service that they provide. And that's not to mention all of their cheating practices like stop-hunting, requoting and etc.
Make your losses in demo. Earn your profits live.
  • #19
  • Feb 5, 2018 9:29pm Feb 5, 2018 9:29pm
Quoting noobshow
Hi All, I've been working on a Program that can get fast(0.00001ms) broker's Price Feed since last 3 week, and nice i'm done creating the program, but, my main problem is that i'm not a Arbitrage trader, so i know less about it... I want to know how to code a robot that arb between seconds, but don't know what to tell it to check for before making its trades.. I'm good at Programming, just don't know what to check for when it comes to making entries and exits.. Please, can you share your experience, thoughts or strategy for trading Arbitrage between...
Am I too late to respond. I know which broker to use for arbitrage trading. And I have built ea for arbitrage. I can share it with you. Can you share your program that can get fast price feed with me. Lets make an exchange.
  • #20
  • Last Post: Feb 5, 2018 9:30pm Feb 5, 2018 9:30pm
Quoting noobshow
{quote} Done building the expert since a month and some weeks and it is making 80-90%+ Profit on Demo and Live account...
Mind to share?
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