Triangular Arbitrage - page 2

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Manual back testing results

Highest-resolution historical data I could find that does not gap is 10 second data from Dukascopy. Did a very brief manual comparison using GBPUSD, GBPJPY, and USDJPY.

I compared derived price of USDJPY (formula: GBPJPY/GBPUSD) with actual USDJPY price.

Highest gap I could find is 9 pips. (3/16/2006 12:29:01) I don't think 9 pips is good enough.

Now if I can only find reliable tick data, then I'm pretty sure I can find more than 9 pip difference...

Files:
gbpusd_10_5000-analysis.zip  488 kb
 

Triangular Arbitrage

Is anyone, or has anyone worked on any sort of arbitrage/pair-hedging for the pairs EURUSD>GBPUSD>EURGBP or similar? I would like to chat....

 

I tried it a couple of times. It won't give you statistical advantage over other methods. Synthetical EURGBP in most ways would be identical to the natural EURGBP but the lost of double spread is not a good idea.

You can create a synthetical null position in say

EURUSD buy

GBPUSD sell

EURGBP sell which would always be in the red since you cannot win back a spread

 
Nicholishen:
Is anyone, or has anyone worked on any sort of arbitrage/pair-hedging for the pairs EURUSD>GBPUSD>EURGBP or similar? I would like to chat....

I'm into that right now, and it works.

 

Can you share your system with me?

 

There is a ton of hedging threads/ideas here:

http://www.goldenmoneytree.com/forum/viewforum.php?f=3&sid=398c59501be990801f9e06fdb2ea04d6

Also this guy has an intresting tri/arb idea

http://kreslik.com/forums/viewtopic.php?t=307

 
Mazoem:
There is a ton of hedging threads/ideas here:

http://www.goldenmoneytree.com/forum/viewforum.php?f=3&sid=398c59501be990801f9e06fdb2ea04d6

Also this guy has an intresting tri/arb idea

http://kreslik.com/forums/viewtopic.php?t=307

Thanks! This looks great =D

 
Nicholishen:
Can you share your system with me?

You can find more explanations : http://kreslik.com/forums/viewtopic.php?t=307

in my case, Kreslik was the guy who brought this topic in my attention.

but basically:

triangle arbitrage is possible when for example:

EURJPY EURUSD*USDJPY (which 99% of the time is true)

now if you will build and indicator showing the difference:

EURJPY - EURUSD*USDJPY

You will see that oscillates around value 0. theoretically every time this difference is 0 you have an arbitrage opportunity:

if indicator >0 according to triangle arb. theory means that EUR is overvalued against JPY and you need to sell EURJPY (buy JPY with EUR)

if indicator<0 the opposite is true and you need to buy EUR with JPY.

practically that is what it looks like:

Included in calc. spread of EURUSD,USDJPY, EURJPY = 2pip.

(sorry it seems impossible to upload pics quickly , need to resize)

Files:
triangle_arb.png  9 kb
triangle_arb1.png  5 kb
 
apfx:

Included in calc. spread of EURUSD,USDJPY, EURJPY = 2pip.

Can you tell me which broker offers 2pip spread on EURJPY?

The lowest I can find is 3pips for EURJPY.

The idea is interesting but I think it will depend too much on the broker. The broker could "sabotage" our trading by not executing the orders fast enough or by executing them at a different price.

 
cucurucu:
Can you tell me which broker offers 2pip spread on EURJPY?

The lowest I can find is 3pips for EURJPY.

The idea is interesting but I think it will depend too much on the broker. The broker could "sabotage" our trading by not executing the orders fast enough or by executing them at a different price.

Yes, everything depends on the Broker (trading costs and execution):

Oanda gives : EURJPY-2.3 pip, USDJPY-1.8 pip, EURUSD, 1.5 pip

EFX Group/MBtrading: EURJPY-2pip, USDJPY-1 pip, EURUSD, 1 pip + commission $5 per $10000 Traded.

I don not know if you can trade not round lotsizes with Currenex or HotspotFXi or IDealPro. That would be a good deal.

Automation is possible with any of them.

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