Brokers against traders: the endless game

For successful trading, a trader needs to not only have a good sense of market, an ability   to process tons of information and a huge amount of data, to master elements of technical and fundamental analysis, but also to operate in favourable market conditions. And I’m not talking about the sector or the economy as a whole, but the conditions in which the certain trading transaction is being carried out. This is about spreads, delays in the order execution, and other things which depend on the quality of the FIX API broker company.

That’s no secret that most brokerage companies play against their investors and traders. They set conditions that are far from market,   as well as unprecedented fees for opening and sometimes even closing the transaction.

With this in mind, you need to know which options you want to consider when choosing a quality broker. You start with an analysis of adverse trade conditions:

  1. Spread. This option determines the difference between the buy and sell prices of the financial asset. The greater the difference in this indicator, the greater your loss is when you open a buy or sell transaction. That’s because when the asset asset is sold, it is then bought for a different price. This difference is what constitutes the spread. Some brokers specifically impose an extra charge on an asset which price is going to be different from market. Thus, even 1-2 spread points will reduce your revenue (or increase the loss), and the broker will profit from it. Spreads are also often referred to as markup. To test this option, you must register with the broker, open a real account, and watch the spread of different currency pairs, because the promotional slogan “narrow spreads” or “spreads starting at 0 points” does not guarantee the result.
  2.  The next parameter, which defines a bad broker, is order slippage. A slippage (or delay in executing orders) is the moment when the transaction is opened and there’s a lag of not opening the trade operation. For example: A FIX API trader decides to sell the GBP/USD currency pair in the FIX API Forex market for the price of 1.2200. But due to the slippage, the transaction was actually opened at the price of 1.2205. That is, at the time of the request from the trader, before the order was executed on the broker’s server, the price went 5 points up, which would eventually become the lack of revenue for the trader (or + 5 points of loss). If the spread can be analyzed visually, you have to open a deal to track this parameter. I recommend that you top up a price account and perform several trade transactions to analyze this option.
  3.  Type of order execution. It’s also an important element for both manual and algorithmic trading. As you know, there are several types: Dealing desk and Non dealing desk (ECN and STP). I recommend that the first option be bypassed, because this type of performance indicates that all of your trading transactions happen on the broker’s server, not in the market. In this case, this option will be present in the broker’s Dealing Desk.

Of course, I could also write about those brokerage companies that do not allow to withdraw funds, do not comply with the terms of the contract, or simply “discharge” a deposit. The main idea was to show that on the market, there are some renowned brokers who still use these negative parameters. These parameters are the key negative points on the part of brokers.

Yet you can circumvent all these moments (or reduce the probability of spreads and slippages) if you trade via the FIX API. Trading through this protocol allows to connect the algorithmic strategy directly to the liquidity supplier’s server. This makes it possible to circumvent the broker’s server-side latencies and trade on market conditions.

 

What do you need to know if you use the Latency Arbitrage strategy

Latency arbitrage is an arbitration strategy, which consists of simultaneous analysis of a financial asset at different stock sites, with the aim of opening a trade position towards the sites with latencies. Simply put, Latency Arbitrage is supposed to analyze the quotations of two brokerage companies and to carry out a transaction where the value of the asset lags behind.

Let’s take an example:

A FIX API trader is analyzing the EUR/USD currency pair at two different brokers. It costs 1.0755 at the first one and 1.0750 at the second. Let’s assume that the trader has already determined that the first FIX API Forex broker displays a more real market picture and provides the relevant quotes, while at the same time, the second broker does this with delays. Thus, the trader decides to purchase the currency pair at the second broker aiming at  +5 pips of difference. These 5 pips will constitute the profit for the trader. Since arbitration trading consists of instantaneous analysis and transaction making, the yield of the strategy is generated by large number of operations with a minimum profit level. But the level of risk and drawdown is also minimal.

As we have already determined, the essence of this strategy is in opening positions at a slower broker. Therefore, there are risks that you must know about:

  • The slower broker is the sign of poor quality company. This may incur additional investment risks. I recommend that you look for a price difference not between a stable and a weak broker, but between two top brokers. The exchange rate will be smaller, and it will be less likely at popular brokers (which reduces profitability), but it guarantees the security of funds;
  • Since the essence of Latency Arbitrage is in the opening of speculative positions with low income, large spreads and slips can bring the trade result to zero. To avoid this, I recommend that you automate your algorithm for trading via the FIX API protocol. This will help circumvent the unfavorable moments of trading such as spreads and slips. The main thing is that the chosen brokerage companies should not use the same liquidity suppliers. Then the exchange rate difference requirement will be met.

Use these key nuances in your favor. This will allow you to get the financial result of your Latency Arbitrage trading strategy to a whole new level.

 

MT4 versus cTrader: which is better?

In the world of information technology, the trader is provided with a wide range of different support software which helps in trading. Thus a variety of graphical analysis tools (indicators), trade panels and robots, as well as platforms for performing operations are generated. Already there are several dozens of trading terminals that are designed for trading in financial markets and in particular in FIX API Forex. Today, we’ll talk about such prominent trading software as MetaTrader4 and cTrader.

MT4

This trading platform is present on the market and helps traders make deals for 20 years already. The platform allows to analyze and make transactions in virtually any market. However, the majority of FIX API Forex brokers use it precisely in this market (Forex) as well as to trade CFD contracts. For MetaTrader4 numerous support utilities were developed, because this platform has its own programming language and a wide range of ready-made libraries to facilitate coding. Moreover, the platform supports and is able to integrate with applications in these languages: FIX API C#, FIX API python, FIX API Java. This is a great solution for traders, because it is free and is offered by virtually all brokerage firms.

MT4 Features:

  • The platform has flexible settings for work tools and provides the possibility of combining it with other elements of analysis;
  • The platform can be connected with several different accounts;
  • MT4 uses an integrated development environment, the MetaEditor, which allows to create custom indicators and copyright trading robots;
  • The platform allows to connect to the MQL service and use the market signals and forums directly from the terminal;
  • There is an opportunity to integrate the platform with external programs (for example, download quotes as excel spreadsheets in real time);
  • The ability to set all types of pending orders;
  • There are many support utilities and plug-ins that extend the functionality of the platform.

cTrader

This is a new trading platform, which is designed for trading CFD contracts. This terminal is just beginning to conquer the market. The main function of cTrader is its ability to perform integrated in-depth analysis of the market by reading current market bids. This allows to analyze assets by transaction volume, prices offered by other market players, as well as get aggregated quotations.

Features of the cTrader:

  • Full market depth;
  • Flexible settings of the trading terminal and support tools;
  • Ability to connect multiple types of accounts;
  • Free software;
  • Additional platform for algorithmic trading (cAlgo);
  • The program is limited in support instruments and additional asset analysis tools;

Lack of embedded editor (for cTrader, all software is developed in C# programming language).

Based on these descriptions of the two platforms and their features, one can draw a clear parallel:

MT4 cTrader
Low level of market depth High level of market depth

 

User-friendly interface with a large number of analysis tools

 

User-friendly interface with a large number of analysis tools

 

The ability to integrate with external programs

 

No integration capabilities

 

Integrated development environment

 

No integrated development environment

 

A large number of support software (trading robots, indicators, expert advisors)

 

Minimum of support software

 

Trading robots can trade directly through the terminal Trading robots work via an additional sAlgo terminal

 

As you can see, one of the main advantages of MT4 is the fact that it provides many extra features, as well as is fully integrated to run on any site. This makes it more flexible. A lot of software developed for this trading terminal is the main reason for traders to work with this platform.

On the basis of comparative analysis, we can say with confidence that FIX API MT4 holds the leading position among all available trading terminals.

 

 

 

Simple Forex strategies review

You may find many trading systems on the Internet that are ready to work on FIX API Forex. However, it should be understood that there is no such thing as a free lunch. Most of these “working systems” are nothing more than a set of trading rules and principles that do not guarantee results.

Today I will make a small FIX API tutorial, in which I will tell you what you should look for when searching for simple trading systems.

First, you need to understand what elements should a simple trading strategy include:

  1. Working timeframe. A trading system must necessarily have a work interval in its description. For example, scalping systems generally conduct the analysis on the M1-M5 timeframe. Fix api arbitration systems perform operations in a fraction of a second. And trend-based systems have a broad open position hold period and analyse within the H1-D1. At first glance this is a trivial method, but it’s still valid. The result of a system designed for FIX API trading on D1 period, will be significantly different from trading on the M5.
  2.  List of trading instruments. Also a simple but valid option. Some trading strategies are developed specifically for a particular asset or a small group of assets. As with the first parameter, if the system was made for the EUR/USD currency pair, trading on USD/CAD (or any other assets) does not guarantee the result.
  3.  Analysis tool set. Of course, the description of the system should include the full set of analysis methods, namely the technical indicators, turning figures or support/resistance levels. This depends directly on the trading strategy. Each system on the Internet has this parameter (while 90% of systems consist only of it). But here it is important to understand that the indicators in the set must be mutually reinforcing. That is, the system should include both trend movement indicators, and the oscillator. If you already have some trading experience, you can easily determine if this condition is satisfied in the strategy.
  4. The parameters of risk and money management. Each system must have both entry and exit points. That is, the algorithm that shows when to open a transaction according to a signal (as in parameter 3), when to close it, and what volume to choose for a trade operation. Effective capital management helps to avoid major drawdowns and preserve the invested capital.
  5.  Availability of process automation. It is not required, but if the system is capable to work in an algorithmic mode, then it will testify the reliability of the selected algorithm.

These are the key parameters that need to be included in a simple strategy for working on FIX API Forex market. With these parameters, you can filter out the selected strategies.

For example, trading systems, which are based on the intersection of moving averages, provide market entry parameters, however, is not always clear when to close the deal and what risk level to set. Strategies based on the candle (price action) analysis, describe the position entry and exit more accurately, however, only some of them include risk management options. Leveled strategies are much easier from this point of view. The levels already include the timeframe on which you’ll work, the instrument set, and of course market entry and exit points. Scalping strategies also are easy to understand and include an extended list of necessary parameters.

Here I’ve tried to outline the key points that should be addressed in the search for simple trading systems. FIX API MT4 trading terminal includes many tools to conduct effective analysis, to which you should also pay attention when choosing strategies. The main thing to remember: the trading system should be simple and understandable for you!

 

How to use divergence signal in a trading strategy

Choosing a trading system is quite a long process, through which every trader has to go at some point. The difficulty is in finding signals, as well as following them. If you create your own system, trading process will become much is easier as no one knows their product better than the author.

Trading strategies may be based on several signal from different indicators or patterns on the FIX API Forex market. The combination and complementarity of these signals shape the trading system. Most traders use different methods to forecast the entry points, one of which is the divergence signal, which we’ll look at in more detail here.

Divergence is the difference between currency pair quotations and the value of a technical indicator. There are two types of divergence: bearish and bullish, which indicate a downward correction wave and an upward wave, respectively. In fact, divergence indicates a reversal of the price relative to the established movement. This signal will be of use for everyone who uses the trend and counter-trend based trading strategies.

As we have already determined, divergence appears when the price shows an inverse correlation with the indicator. But which indicator exactly? In fact, a set of several simple indicators in FIX API MT4 is perfect to determine divergence: the Awesome Oscillator, MACD, Stochastic, and RSI.

So, let’s take a look at an example of how to combine this signal with a simple trading strategy. For example, consider Bill Williams’ system, as his trading algorithm includes Awesome Oscillator indicator, on the basis of which we will define divergence.

Quotations of the EUR/GBP currency pair are in an uptrend. Williams trading system confirms this movement with ascending lines of the Alligator technical indicator and fractal zone. We see that each new “high” on the chart is above the previous one, which is also a sign of uptrend. Now you want to compare, if there is a difference at these points with the Awesome Oscillator technical indicator. As you can see, every “high” in the quote window coincides with the AO descending value. That is, there is a situation where price increases, while AO falls. This is the situation of discrepancy, or divergence. Also, according to Williams’ system, the quotes strayed from the Alligator lines to form the “first wiseman” signal for sale by this strategy. Thus a FIX API trader gets two signals for sale.

As you can see, this movement is against the trend. Loss limitation will be set above the second “high”, and the take profit can be set in a range between 61.8% and 76.4% of Fibo grid. Thus, the ratio of SL and TP will be 1 to 4, which is an excellent result and increases the mathematical expectation of the trading strategy.

The benefits of introducing divergence signal in the trading system:

  1. An additional signal to search for correction zones that can be supported by other technical signals;
  2. Increase of the number of filters to open a deal at a FIX API Forex broker;
  3. Better risk management (divergence-based trading will always have a short Stop Loss level and a long Take Profit);
  4. A wide range of indicators to find divergence signal;
  5. Ability to work both in the trend direction and against it.

Let’s take a look at a practical example of how to apply signal divergence to a trading system. I am quite sure that this signal is easy to fit in any trading strategy and will be an additional tool for effective analysis and forecasting the future price movement. Moreover, this signal is easy to use and can be automated using a trading algorithm.

 

 

FOREX ROBOTS FOR FIX API TRADING

I have previously covered the topic of forex robots and their nature. Let me remind you a few key points of forex robots. First, the appearance of robots allowed for faster trading and thus for the forex market growth. They also let traders have more time and resources to analyze the market and make decisions. Robots created new types of trading that were not possible before – like scalping or arbitrage trading. In a word, forex robots are extremely important tools for any trader.

However, most of the forex robots, free or paid have been designed and built on standard algorithms and so are limited in their functionality. What makes a robot successful? Mostly, it is the speed of the operations performed. In this case, we understand, that a robot should in fact monitor the current market situation and analyze it live.It means it must have an actual live access to the market.

So, FIX protocol came to rescue. FIX is a financial protocol that lets your software access actual market data.

The core of FIX protocol is the instantaneous data exchange. For us, traders, it is crucial to know the cost/price of an asset and the faster we know it the faster our forex robot analyzes and reacts.

The problem here is that most of the software (forex robots) are built to perform trades on brokers’ serversand not via FIX protocol. Such robots can be under pressure from the broker’s side – increased slippage, delayed order time, etc.

The advantages of a FIX protocol are clear:

  1. Trades with no spreads and slippage
  2. Orders are not delayed
  3. Complex asset analysis is available
  4. Opportunity for effective Arbitrage trading (FIX API Latency Arbitrage, FIX API 2-LEG Latency Arbitrage)

The major thing about a forex robot working through FIX API protocol is that it takes its data directly from the quote or liquidity provider avoiding broker server delays. Software wise the difference between FIX API forex robot and a normal one is minimal but the results of trading are astonishing. Surely your forex robot must have FIX API through your broker server to be able to work properly.

One of the most important things is to find a good FIX API forex robot. How do you do that? There are a few forex robot review sites and that would be your starting point. Analyze the reviews, pay attention to a software developer – who it is, what products have been created before, if there is any trading experience behind the algorithms, what kind of support is provided after the purchase. All these things are important.

It goes without saying that a product you are considering to buy or get free should have positive reviews and its performance data available. Some of the useful information can be found at different forex social network sites where you can register and follow successful traders. Some of the developers offer free webinars to get you acquainted with the product or/and peculiarities of FIX API trading, Latency Arbitrage trading, etc. It will not do any harm to watch those webinars and get as much information as you can.

Divergence-based Forex robots

New trading tools appear all the time: new auxiliary indicators, modified old ones, cutting-edge algorithmic systems. These systems are essentially trading robots that are able to analyze assets and open buy/sell transactions. Simply put, a piece of code is written which, based on software iterations, reads the values from the chart.

As known, each indicator or technical figure can be detected and recognized by a robot. Indeed, in their essence, all the indicators that appear in the MT4 fix api terminal are also software code that displays the value based on the quotations. Take, for example, the simple moving average. This indicator represents the average price value during the last n bars. That is, if a trader sets n=50, the program calculates the average over 50 candles and will give the result in a line form. Trading robot is able to perform this calculation, compare prices with the MA level and based on that decide on a long or short position.

This example of MA is the easiest working principle for a robot. Today I’d suggest to consider, how does a divergence signal based robot work.

So, divergence is the difference between the currency pair quotations on the FIX API Forex market with the values of the indicator. In order to understand what it is and how it works, let’s look at an example of divergence on the basis of a MACD indicator.

The MACD technical indicator is represented with two lines (the MACD line and the signal line), as well as histograms (which show the difference between the two lines). To detect the technical divergence signal, a histogram is required. Since we already know that divergence is the difference between the price and the indicator, we need to spot this difference.

The graph clearly shows that the moment when the currency pair quotations showed growth, MACD histograms declined. We see that peaks of quotations grow, and histograms peaks are falling. This is the signal for the correction movement, which did actually happen afterwards. This kind of divergence suggests opening short positions after the second discrepancy.

In turn, the trading robot analyzes both the MACD value and the value of quotations, and, based on its program code, opens a deal after it “sees”, that is, detects, a divergence.

The main advantages of a divergence-based trading robot:

  1. Speed: the robot is able to detect the presence of divergence in a fraction of a second and then perform a trading operation;
  2. Monitoring of the whole market: A FIX API trader is just not able to simultaneously review all assets, and often the signal simply goes unnoticed;
  3. Continuous trading: the key advantage of any robot, not only of one based on divergence, is the 24/5 operation. Trading via FIX API broker, the robot will constantly analyze the market in search of divergence while it is open;
  4. Short stop loss level relative to the take profit level Loss limitation will always be set behind the peak, and the level of profit has to be 4-5 times longer, which is a good indicator and increases the mathematical expectation of the trading robot.

It is worth mentioning that a divergence-based trading robot can determine it not only by MACD indicator, but also by some others: Awesome Oscillator, RSI, MA etc. Also within the parameters of the robot, you can set it for trading after two as well as three divergencies (3 maximum quote peaks and 3 consecutive indicator drops), which makes the signal more robust.

Divergence-based trading robot is a full-functional tool for FIX API trading. It is an irreplaceable assistant for a trader, as well as a means for performing automatic transactions.

 

 

 

YOUR TRADING STRATEGY IS YOUR PERSONALITY

It might sound strange to you but my personal forex experience proves this headline. Despite the myriad of technological software developed and built for the last 15 years, forex is still the market of personalities. And having analyzed trader’s choice of tools it is possible to understand the basics of trader’s personality.

People arrive to forex with wealthy-over-night ads in their minds and images of the ocean front villa and the laptop next to the pool. Most of these images fade very quickly and most of such people lose and go home. Forex is a strange place but once you decided to jump in look at it as a place where there is no magic happens and hard work awaits you.

Choosing a trading strategy is a tricky thing. New comers usually make on and the same mistake – they are trying to find the Holy Grail and the best and the most money-making strategy ever.

However, learning is the key to success. Let’s have a look at ideal trader and what would he/she do in the ideal world:

  1. Lots of learning. An ideal trader would start learning how forex market is built, who is who and what the relationships are between a trader a broker a liquidity provider, etc.
  2. A trader would analyze and review different strategies and approaches to successful trading. That requires a lot of homework. Reading forex robot review sites, analyzing different software developers and their performance as well their products.
  3. Only then an ideal trader would pick up several software items and play with them before entering a real-life world of trading.

Having completed these three steps a trader will increase his/her chances of not losing funds on day 1.

I would like to say a few more words about choosing the trading strategy and building your own trading system.

A trading system is nothing but a set of rules and principles of market data analysis and trading. The core of the system is your software or a set of algorithms that is carefully crafted to carry out your trading according to your set up.

I believe that successful trading is only possible when you have created your trading system. You’ll know exactly what kind of signals the trading system generates, at which phase or stagethe market currently is, what asset you should buy or sell, what amount of funds should be invested into a deal, etc.

Eventually, after a long search of different paid and free trading systems, (they are also called forex robots) each trader will arrive at his choice of strategy and the software. Believe me it won’t have to be your own algorithm, indicator or math model, you can pretty much do well with the existing and tested software products.

I believe a successful forex software is likely to be developed by a company with extensive market experience and trading experience, so pay attention to a developer of the product in question. Check how many products have been released, read the reviews on special forex robot review sites, talk to other traders in the social networks and get an understanding who the developer is. The other key thing is a post-purchase support – a good developer will help you set the software up and avoid unnecessary hassle.

I see three major points in creating a trading system:

  1. The chosen strategy of the trading system
  2. The accepted tactics of the trading system
  3. The management of funds

A global vision of your trading defines your strategy. If you see the forces behind the market and recognize signals that will be shaping the market in the nearest future, you can build a great strategy.

Tactics is your response to what you recognize in the market. So here you need to employ your chosen software and interact with your trading signals. And that is a point where your personality kicks in. How many filters do you prefer prior to decision? What methods do you employ to analyze the market? Do you stick to one currency pair or the whole list? These are the questions you will need to answer as a trader.

My favourite trading strategy is Arbitrage and it took me a few years to arrive to a successful Arbitrage trading. I was building and re-building my strategy along with the market development. For example, when brokers spotted my Latency Arbitrage trading and delayed my orders and/or increased slippage I had to adjust and improve. I mastered a 2-LEG Arbitrage trading where brokers can’t identify that it is an Arbitrage trading in fact. Lately, I came across of a very interesting concept called Lock Arbitrage that allowed me to make another step forward in finding my successful trading strategy.

TRADER AND BROKER: ARE THEY REALLY FRIENDS?

That’s a great question for a long discussion. I have decided to demonstrate the relations between a broker and a trader through a very interesting tool – High Frequency Trading – Latency Arbitrage and 2-leg Latency Arbitrage.

Let’s start by understanding what Arbitrage is all about. It is a forex trading strategy based on spotting fast and slow brokerage and taking advantage of it. In simple words – a trader is using a forex robot software that finds a difference in quotes for the same asset on a faster and a slower broker and does the trade netting the tiny positive result. With the huge number of trades (and that is why it is called High Frequency Trading), the robot is scoring decent profits. So, it looks like a football game between a trader and a broker. To get things going both parties invest into a lot of training J to win. Both invest into more and more sophisticated software but brokers do have advantage over traders. They have more money, they control their broker servers and they have access to more information than traders.

Theoretically, brokers are interested in traders, more traders – more trades and more profit for brokers. That’s easy to understand. The question is whether a broker is interested in a losing trader or a winning trader.

Traders have employed Latency Arbitrage and HFT strategy to make money on very small quotes differences between different brokers. How did brokers fight back?

Well, some have introduced a policy on their sites that trades with minimal time are not allowed, some brokers purposefully delayed order time and increased slippage. Generally, a broker has a million tricks to get a trader to lose. The traders, however, answered with a 2-leg arbitrage that is a lot harder to spot for a broker to understand that Arbitrage trading is going on.

How does it work? 2-leg arbitrage is when a trader gets an asset from one broker and sells it immediately with the second broker. This type of trading is harder to identify as an arbitrage trading.

So, if you are a trader and your key strategy is HFT then you need to arm yourself with a quality 2-LEG Arbitrage software. Choosing one is a serious job. The good start would be to view forex robot review sites and read about different software developers. Usually the best software comes from a company experienced enough in trading and working with brokers. The key point in successful trading is to know how brokers operate, how they think and where they are ready to catch you. There always be fast and slow brokers due to a million of different reasons and smart traders must use this situation to score profits. However, it can be properly done only with the help of a very good software and one more trick. Most of the software will require VPS (virtual private server) installation, so always keep your VPS in the same data center as you broker server. This will allow you for a speedy trading.

 

 

Latency Arbitrage vs 2 Leg Arbitrage

HFT trading induced a lot of techniques and algorithms for financial asset trade. The strategies which previously required to spend a lot of time and effort on, are now run in a matter of milliseconds. And all this thanks to the automated trading robots.

As with every software, trading robots were continuously improved, updated and optimized. In turn, the number of their specifications only increased. Impulse development of this sphere also provoked additional conditions for trade, thus creating the FIX API Protocol. The essence of this protocol is that financial information, quotations included, can be acquired much faster. Furthermore, regular traders can get access tothisprotocolviatheFIX APIbroker.

As this protocol provides access to more quickly received quotations which makes a trade advantage, it brought arbitration transactions to the world.

But in turn the arbitration trade also divided into two types:

  • FIX API Latency Arbitrage
  • FIX API 2-Legs Arbitrage

Today I will make a small FIX API tutorial in which we go over every type of algorithmic arbitration strategy.

FIXAPILatencyArbitrage is a strategy which transactions are based on brokerage “latencies”.

FIXAPI2-LegsArbitrage is the simultaneous opening of different (sell/buy) orders for the same financial asset, but on different sites, at the moment when there is a difference between prices for this asset.

The basic principles of these strategies

FIXAPILatencyArbitrage conducts the analysis and monitoring of currency pairs values and finds the deviations in them. Then, the robot makes the decision of buying the cheaper asset. The bottom line is to identify a “quick” broker. That one quotations vendor who ensures their timely updates, and also has a real picture of the market. In addition, you need to identify a “slow” broker to whom quotes come slower. The account is to be opened and trade is to be done at the second broker.

For example: the price of the currency pair EURGBP at the quick broker is 1.22343, while at the slower one it is 1.22333. The difference in 5 pips is the yield for the algorithm. The robot, according to the strategy of FIXAPILatencyArbitrage, buys the currency pair at the second broker and will record the result by the “fast” broker price at the time of opening.

2-LegsArbitrage, as well as LatencyArbitrage analyzes the same asset and compares for the presence of deviations. Note! In this strategy, you do not have to define which broker is “slower” because the trading is conducted simultaneously at two sites. The robot analyzes the asset, compares prices and in case of difference, opens up a deal to buy at the broker where the quotes are lower. Respectively, it sells where the quotes are higher.

For example: the cost of EURGBP at one broker is 1.23455, and 1.23450 at the second one. Trading robot that works with the FIX API 2-Legs Arbitrage strategy will open the transaction for the sale at the first broker, and will purchase from the second. These 5 pips will become the potential income of the trader.

What are the advantages and disadvantages of FIX API arbitrage strategies

In order to determine which one is better, it is enough to look at the weaknesses of each of the options. LatencyArbitrage is very easy to be tracked by the brokerage companies which also have robots to search for this kind of trade. That is because the transactions span less than one second and are commited in large amounts. Thus, the broker may affect trade through an additional spread or delay. On the contrary, 2-LegsArbitrage trade is difficult to track. Indeed, in any case, the trader will have a minimum yield (5 pips in our example), that allows to hold the positions from several seconds up to several minutes. This type of operations is impossible to track. In addition, the second part of the deal is traded at a whole other broker, which makes the tracking process even more complicated. Also, a key shortcoming of the LatencyArbitrage strategies, and at the same time an advantage of 2-LegsArbitrage, isinfindingthe “slower” brokerwhichentailsconstantmonitoringoftradespecificationsofbrokeragefirms. For the FIX API 2-Legs Arbitrage it doesn’t make a difference.

To sum up, I would like to emphasize that for the successful work, a FIX API forex broker is needed, which will provide the opportunity to trade on market quotations. It is also worth mentioning that each of these strategies is profitable, and this is essentially the main factor. Yet more simple to use, as well as less defect-prone, is the 2-LegsArbitrage strategy.