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Triangular Arbitrage using Bid Ask Quotes

Have you ever wondered how to determine how to compute the triangular arbitrage formula using bid and ask quotes?  Using four simple rules it is possible to compute triangular arbitrage relationships using bid and ask prices. Three example computations for three different symbols are presented with an intuitive description of how to interpret the results in terms of identifying inefficiency, including the triangular arbitrage “risk free” opportunity, as well as the opportunity to transact at a better price using the synthetic than the underlying, even when no real arbitrage opportunity exists.

Triangular Arbitrage with Bid Ask Quotes
Triangular Arbitrage with bid ask prices 1000 bid vs synthetic ask quotes

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Calculate Triangular Arbitrage Lot Size

January 23, 2013 2 comments

Have you ever wondered how to correctly size positions between the underlying pair and its synthetics to eliminate or hedge directional risk? This article describes  how to calculate triangular arbitrage lot size to fully hedge all exposure when initiating a triangular arbitrage trade. The arbitrage trade is at the heart of all good strategies that take advantage of inefficiency. In the forex market this means triangular arbitrage, so understanding how to correctly size positions to eliminate or minimize individual currency risk is very important.

Triangular Arbitrage Lot Size

Triangular Arbitrage Lot Size to capture 6 pip inefficiency synthetic pair
What triangular arbitrage lot size should be traded to capture this 6 pip inefficiency?

Trading Search Engine

December 31, 2012 Leave a comment

Try out this specially optimized search engine just for traders of forex, stocks, bonds, foreign exchange and get better results from all your trading search queries.

Trading Search Engine

 

 

Ten Reasons Why Out of Sample Trading System Performance May Be Worse than In Sample Performance

Why do trading systems tend to perform worse on new data?

This is the question so many trading system developers ask. The answer is that there are many reasons why test performance may be much better than live trading results.

Ten Reasons Out of Sample Performance May Be Worse Than In Sample Trading System Performance

Pairs Trading MT4 Indicator – Market Formula = Forex Trader + Metatrader

Pairs Trading MT4 Indicator – Market Formula = Forex Trader + Metatrader.

Simple pairs trading indicator for Metatrader 4 named Pairs with Beta for analyzing currency pair spreads. Allows custom multipliers (beta) to be used with the two pairs being analyzed, then plots the spread in a sub window.

For instance if EURUSD and GBPUSD are the two pairs being studied, and the beta for GBPUSD is 1.4, then the following formula would be plotted:

EURUSD * 1.0 – GBPUSD * 1.4 (shown below in dodger blue).

Pairs Trading MT4 Indicator - Market Formula = Forex Trader + Metatrader

Triangular Arbitrage 101

December 13, 2011 1 comment

Triangular arbitrage, also known as tri arb, exploits price inefficiency by trading in three currency pairs to produce a risk-free transaction in theory.  This article explores the basics of triangular arbitrage as they relate to retail forex traders, how to work out synthetic pairs for each currency pair, as well as some of the practicalities of applying the tri arb concept in the currency markets.

Triangular Arbitrage 101

MQL4 Forex Trading Function Reference With Sample Code

Have you ever wanted to learn about the MT4 forex trading functions without needing to learn Russian? In this series all MQL4 trading functions are described in detail. MQL4 trading functions are broken down by functional category, including the most important functions: OrderSend, OrderModify, OrderClose, OrderSelect as well as the many other important and useful trading functions and constants. Sample code is provided by category, including functional routines that may be dropped directly into your code for OrderSend, OrderClose and OrderModify – three of the hardest to implement functions in MQL4.

MQL4 Trading Functions Lists all MQL4 trading functions alphabetically and by functional category.

MQL4: OrderClose, OrderCloseBy, OrderDelete, OrderModify, OrderSend

MQL4: OrderSelect, OrdersHistoryTotal and OrdersTotal

MQL4: Specific Order Information  Includes reference for MQL4 functions:
OrderClosePrice
OrderCloseTime
OrderComment
OrderCommission
OrderExpiration
OrderLots
OrderMagicNumber
OrderOpenPrice
OrderOpenTime
OrderPrint
OrderProfit
OrderStopLoss
OrderSwap
OrderSymbol
OrderTakeProfit
OrderTicket
OrderType