Posts Tagged ‘currency markets’

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?

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