The Triangular Arbitrage EA exploits market inefficiencies between three related currency pairs, placing offsetting transactions which cancel each other out for a net profit with virtually no risk. On the flip side, it cannot be traded with microlots and trading opportunities do not happen very often. Boost your trading activity with the easiest and most complete Triangular Arbitrage EA available, just like our customers have already done.
Triangular arbitrage also referred to as cross currency arbitrage or three-point arbitrage is the act of exploiting an arbitrage opportunity resulting from a pricing discrepancy among three different forex pairs in the foreign exchange market. A triangular arbitrage deal involves three trades, exchanging the initial currency for a second, the second currency for a third, and the third currency for the initial.
During the second trade, the arbitrageur locks in a zero-risk profit from the discrepancy that exists when the market cross exchange rate is not aligned with the implicit cross exchange rate. A profitable deal is only possible when a market inneficiency arises and if execution times are small.
In practice, there is substantial execution risk in employing a triangular arbitrage strategy for retail traders, as execution times are never perfect on the server-side. An example of a triangular arbitrage ring is U. These pairs can be thought of as an algebraic formula with a numerator and a denominator, making up the following expression to find ineffiencies. If the result of the above equation is not zero, we know that these forex pairs are not balanced and the market is presenting an inefficiency which we might might be able to profit from.
In order to make a triangular arbitrage trade, the ineffiency that triggers the trade must always be above the combined cost of spread and commissions for the currency pairs involved. Making a total gain of 53 EUR after paying transaction costs, which are already computed into the formula above. Please note that for Triangular Arbitrage to be effective, both Bid and Ask prices must be taken into account, depending on the direction at which the deal is going to be processed.
It is important to constantly monitor the slippage incurred by the EA when executing trades. Since the EA trades combined inefficiencies from 3 pairs, any combined slippage of 3 pips also invalidates the deal and forbids the EA from making profits.
The expert tab of the terminal displays the slippage incurred by each trade executed. Pay close attention to it. If the combined slippage for the trades goes above 1. When loading the indicator to any chart, you will be presented with a set of options as input parameters.
Don't despair if you think they are too many, because parameters are grouped into self-explanatory blocks. A high-frequency trading strategy that allows traders to profit from pricing inefficiencies between two brokers. Easy to set up and supervise No indicators or hard analysis needed The strategy is time-frame independent The strategy is neutral to news, gaps or price spikes Deals are completely hedged: You decide which pair set to trade Adapts to spread, commissions and swaps Implements an optional trade-expiration feature Customizable price trigger and profit target It can trade any of the following pair sets: What is Triangular Arbitrage?
A Triangular Arbitrage example An example of a triangular arbitrage ring is U. Given the following prices, for instance, we find that the pairs are unbalanced In order to trade, we would need a deeper ineffiency, like the following: We start with , EUR Buy What lotsize should I start trades with?
We recommend starting trades with a least 0. Using a smaller initial lotsize is not recommended, as it defeats the whole purpose of the strategy.
Can I choose what pairs to trade? Yes, the EA has a drop-down menu with pair sets to trade. Do I need a VPS? Triangular Arbitrage requires almost perfect execution and very little latency.
Does the EA trade very often? No, it does not. Triangular inefficiencies do not happen very often. The EA does not trade in the tester! Right, it does not. At the time of writing, Metatrader4 does not support multi-currency systems in the strategy tester. However, Metatrader5 does support it, so, make sure to get the MT5 version demo to test it.
What Magic Numbers does the EA use? Magic Numbers used are from to Can I set the stop-loss for each deal? This questions does not apply to this strategy because all deals are completely hedged. The total exposure of all deals is zero. The total loss you can incurr in are the spread, swaps and comissions.
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