Pair arbitration: what is it?

The financial market attracts more and more traders to their networks with the illusion of quick money simplicity. However, those who are familiar with the market, have long understood that this is not so. Everyone who has started and continues to work on the fix api forex, brought something new to this market. Some created their own authorial approaches in the form of a trading strategy. Others have authored technical indicators, and others have trading robots. Today, this abundance of auxiliary elements of analysis makes it possible to form a huge knowledge base and useful content for the future generation. However, do not forget about the traditional tools that have long been alien to this market. And I’m talking about such an approach in the trading as the fix api arbitrage.

Arbitrage trading is based on the opening of trading positions on the same financial asset, but on different stock exchanges. At one time, when computers were just beginning to appear in this segment, this approach was widely used on different stock exchanges, when on one exchange the price of an identical asset could differ and the fix api trader had the opportunity to buy at a lower price and sell at a higher ( ).

For a long time, this approach was not available for the foreign exchange market due to the specificity of its robots, because this market is inherently a single exchange platform. Therefore, arbitration here was not applied. But everything changed drastically after the forex market began to actively use special auxiliary programs for the fix api trading ( ).

The brokerage companies have contributed a great support for this, as they set significant markups on the currency pairs. These mark-ups cause a gap in the exchange rates and an opportunity to open arbitrage transactions.

Pair arbitration is precisely in the classic work on this trading strategy. For example, when the value of the EURUSD currency pair in one broker is 1.1250, and the second one reaches 1.1258, the trading robot receives a signal to the beginning of the action. To do this, you need to specify the normative discrepancy between different brokers (let’s say this difference is 3 points in our example), as well as the maximum discrepancy at which it is necessary to open positions (let this parameter amount to just 8 points). Thus, the robot will open two trading positions: a purchase in the broker, where the quotes are 1.1250, and also the sale on the platform where the quotes are 1.1258. After that, when the two pairs of transactions after a prolonged breakdown return to the regulatory range, the trading robot will close both positions simultaneously. Continuing our example, let’s consider that the closing prices will be 1.1267 and 1.1270 respectively. Thus, the first transaction will close with a yield of 17 points, and the second one with a loss of 12 points. The financial result for these polices is 5 points of profit, which was formed absolutely without any risk.

Some exchange speculators have developed this direction and a few more fix api arbitration algorithms have been created, the boiler has an identical idea, but completely different logic of operation (fix api Latency Arbitrage and fix api Lock Arbitrage). I think we will discuss the other options for the work of arbitration techniques in next articles.

This approach is used with the help of special algorithms, because a trader cannot keep a track of such micro-oscillations, especially on different brokerage trading accounts. Therefore, I advise you to use this algorithm in your trading, because it is able to get perfectly combined with other trading strategies and the fix api trading can be conducted without changing the risks.


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