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14 arbitrageArbitrage strategies are rightly recognized as one of the most reliable in any market, since they make it possible to earn on the movement of prices, as such, without binding to a specific direction. Like most other approaches, the first arbitration tactics appeared on the stock and commodity markets, and only after the 1980s the process of their optimization for Forex began.

In part, this was due to the late appearance of the modern currency market, but the main reason is still in the architecture of the Forex market, but today we will not blow out the dust from history, of course, we will consider the most popular arbitrage strategies.

So, the very first method, which occurs in any forum or worse - at seminars, is called "triple arbitration". It is reduced to trading three currency pairs in the hope of catching the discrepancy between the synthetic rate of the third pair and its real current price. Such an approach does not bring results, so we will not even waste time on its detailed description.

Of course, sometimes it happens that someone, ostensibly, earned a triangle, but in reality everything amounts to an erroneous calculation of the volume of orders.

In simple terms, the profit was obtained not on the price difference, but due to the fact that the volume of one pair was more than the other. Therefore, it is better to go directly to effective arbitration strategies, proven time.

INTERMARKET ARBITRAGE

In the environment of beginning Forex traders, a negative stamp is attached to arbitrage strategies, as many understand them playing the game on the difference in the quotes of several DCs, which appears due to technical failures. In fact, such an approach has nothing to do with arbitrage.

Before understanding further, remember, and what is Forex? As a rule, this term means a spot currency market or in other words - an interbank, and this is absolutely true. But on the stock exchanges there are also currency futures, the dynamics of the prices of which may differ from the trend on the spot market.

Thus, from time to time it becomes possible to earn honestly on the resulting exchange rate difference of the same currency, performing opposite operations on completely different sites. In this situation, the speculator sells an expensive instrument and buys the one that turned out to be cheaper.

It is not necessary to have a serious capital for such operations, as now the CME (the Chicago Mercantile Exchange) can start trading in a contract for the euro with only $ 500, and transactions on a real interbank bank may well replace the dealing center (hereinafter DC) with low spreads and commissions.

Some enterprising speculators are building even more cunning schemes with exchange offices, electronic payment systems, "special unique" are not lazy to travel with suitcases, even in different regions, where there are profitable courses in banks, but this is more of an ordinary gamble, and not business, .

ARBITRAGE STRATEGY ON CORRELATION, SPREAD TRADING

In order not to cause confusion, we recall that in this case, under the "spread" (hereinafter we will write it in quotation marks) is understood not the difference between ask and bid, but the difference between the prices of two or more instruments. Perhaps this is one of the most reliable ways to multiply the probability of a profitable transaction, while minimizing the risks. Before opening orders, you will need to perform several actions:

  • choose DC with minimal spreads, in this case even the floating spread will not be a hindrance, since stop-loss is not used;
  • select high-correlation instruments in the long term, as an example, a combination of the dollar index and the pair usdsek (Swedish krona);
  • at the last preparatory stage, we plot the pair "spread" either in the form of a difference, or in the form of a price ratio (this is not in principle) using special indicators.

Currently, there are a lot of such indicators, but it is better to limit the modification of the known dollar index, which can be edited in any way in MetaEditor, in particular, for our example we get the following result (to edit the parameters, we'll have to open the editor):

14 arbitrage 2

As you can see, thanks to the high correlation, partly due to the algorithm for calculating the dollar index, the "spread" spreads most of the time within a certain range, periodically testing the boundaries. This is the main for most arbitrage strategies on Forex.

At the very beginning of the publication, we mentioned that arbitrators absolutely do not care which way the price will go. With regard to the situation with the crown this will mean the following: a pair of "pre" usdx / usdsek will decrease if:

  • The dollar as a whole becomes cheaper faster than the crown;
  • Crown as a whole rises in price faster than the dollar;
  • The dollar rises in price more slowly than the crown.

Thus, the main thing is that the dual "spread" spreads from the upper limit of its range, and which scenario from the above will develop - it does not matter. After the newly made "synthetics" fought off and went in the right direction, we sell usdx and buy usd / sek. After some time and exit of the "portfolio" in profit, it is recommended to include a script or an adviser, which will close both transactions when the breakeven level is reached.

A private type of spread trading is the purchase and sale of the calendar "spread", which can also be rightfully called an arbitrage strategy, but they do not presume trading from the range boundaries, but the purchase (sale) of a short-term contract (futures on the underlying asset) and simultaneous sale (purchase) distant contract.

As a result, the speculator's financial result will depend only on how fast the demand for individual contracts will grow or decrease, but what kind of market there is formed - bull or bearish, it does not matter. By the way, such arbitration strategy helped the funds to save tens of billions of dollars during crises with their long trends.