Forex Spread Arbitrage
Hi Ariestomaster,
Sorry, but I just cannot get your logic. From what I understood, I see the things in the following way:
By opening same currencies in different directions you create a hedge. This means in the ideal market where there is no initial negative spread that when you close your positive couple, the negative one will have a "paper loss" at exactly the same amount as the profit... i.e. 15 pips profit on the closed couple, 15 pips paper loss on the pending one. Now you re-enter. Every time you make profit on a couple, the paper loss on the other one will increase with the same value. So at the end of the day when your paper loss becomes big enough to get a margin call, it will turn into a real loss and your account will be blown. At the same time you have gained the same amount of pips as the size of your blown account. This means that your real profit will be zero.
But because we do not have an ideal market and we have a negative initial spread, things will get much worse. Every time you close your profitable couple and reopen, your paper loss will exceed your profit with the negative spreads of the two pairs in the new position. So at the end of the day when you reach the margin call, you will end up with a substatial loss. Please correct me if I am wrong.
Yes, your method makes no sense at all...
Yes, your method makes no sense at all...
You should try it before coming to such conclusions...
Also, this system is a perfect copycat of a commercial system... Definitely not discovered by Ariesto... Its quite an old system too... Experimented with it in the past... Infact all can be done in same forex account if it is done with an EA... It works...
You should try it before coming to such conclusions... Also, this system is a perfect copycat of a commercial system... Definitely not discovered by Ariesto... Its quite an old system too... Experimented with it in the past... Infact all can be done in same forex account if it is done with an EA... It works...
Bossxero,
I did a test on the platforms as well and it does not work. It increases the negative paper balance every time you close positions and open new ones and believe me this increase is not proportionate to the closed positive spread positions. Think for a moment and you will come to the same conclusion. At the end of the day you will end up with a substantial loss.
This is so simple but confusing at the same time, why can't you do it with one account?
- Free trading apps
- Over 8,000 signals for copying
- Economic news for exploring financial markets
You agree to website policy and terms of use
The method you are about to see is very simple and straightforward. I will bet that you have never seen
anything quite like it. When I show this to people they always say "Why didn't I think of that?, This is so simple and it makes
so much sense..." And the fact is that it is very simple, very logical, and very powerful.
Most traders try and make things too complicated....
Okay, here we go:
We are only going to trade the GBP/USD and the EUR/USD. If you look at any chart you will see that these two pairs are
highly correlated. Notice I said "highly" not "perfectly" correlated. This distinction is critical, because if these pairs were
perfectly in sync there would be little opportunity for profit. What we are going to profit from is the "aberrations" between
these two pairs.
You are going to have to open two separate forex accounts to do this type of trading. In account #1 you will BUY the
GBP/USD and SELL the EUR/USD at the same time, creating a "spread." In account #2 you will SELL the GBP/USD and BUY the EUR/USD at the same time, creating another spread. As you can see, you are taking the exact opposite positions in each account.
Obviously when you first open the trades, one spread will show a profit, and one will show a loss. This is the key to
my approach to trading forex - As prices move up, down and sideways, one of the spreads will be negative and the other
positive. You close the positive spread at a certain time (discussed below) and leave the negative spread alone (it is just a
temporary paper loss) until IT becomes positive.
Here is the true power of my FX Spread method - you NEVER use stops...EVER. NEVER use limits...EVER. You don't care which way prices are moving BECAUSE IT DOES NOT MATTER!!!...All that matter is that prices move some direction...and they always do.
Anyone that tells you that they know where prices are headed is lying...they may get lucky for a little while,
but in the long run they will give all of their profits back...this is as sure as tomorrows sunrise. The "Crystal Ball" does not
exist...if it did we would all be rich overnight.
Here is the specifics, step by step:
Step 1 Open two separate accounts, preferably at different firms (you don't really want them to figure out exactly what
you are doing, as they will see how consistently profitable you are, and begin copying you).
Step 2 Deposit a minimum of $500 USD in each account. You need this amount to make sure you can ride out your "paper
losses" until they become profitable. Using mini-lots you will need a total of $200 to initiate the spread in each account
($100 per lot) and keep $300 as cash reserve, per spread, to allow for temporary paper losses.
Step 3 As stated above, in Account #1 BUY the GBP/USD and SELL the EUR/USD, at the market. In Account #2 SELL the
GBP/USD and BUY the EUR/USD, at the market. You now have created two spreads, one the exact opposite of the other.
You are playing all sides of the market at one time. Remember...NO STOPS and NO LIMIT ORDERS!!!
Step 4 Sit back and wait .... obviously one spread will begin to be profitable and one will show a loss. Relax....this is exactly
what you want. The spread showing the loss will not exceed the $300 you have in cash reserves, so just leave it alone.
Eventually the negative spread will turn around anyway and become profitable. Remember, it is only a PAPER LOSS right
now...it will only become a ACTUAL LOSS if you panic and close the spread before it turns around and becomes profitable.
Step 5 Know when to close your profitable spread. There are many ways to do this, and I have found the way that suits me
best after months of trial and error. The best way to describe my approach to taking profits is simple...I get up each morning before 10am Central Time and check both of my accounts. I close the spread that is making money, whatever the profit happens to be, and reopen the spread just as it was before. I check my "losing" spread, make notes , and LEAVE IT
ALONE....it is only a paper loss right now, and eventually will become profitable.
I have enough reserves to ride it out for as long as it takes, so I am not concerned at all. Your profits each day will vary, but using full-lots and capital of $5000, I have found it to average about $250 per trading day. So you will see an average of about 25 pips profit per trading day for every 2 spreads you take.
Now, you can enhance your returns by watching the trading action all night long when things get active and take advantage of the volatility. I did this for awhile but it burned me out. I made more money, but I was up all night (in the US) when the FX market is most active. At times I would take repeated profits off of BOTH spreads during an active session. In this case I would usually wait until one of my spreads had 15 pips or more profit, close it, then reopen it. Then my other spread would have 15 pips or more profit and I would close it...fun and profitable, but I was glued to the screen all night until sunrise and I just couldn't take it anymore.