Please discuss about triangular arbitrage system

[LONNV]

I want to triangulate EUR , USD , GBP

Let say here are their relationship.

EURUSD GBPUSD EURGBP

EURUSD=GBPUSD*EURGBP,

GBPUSD=EURUSD/EURGBP,

EURGBP=EURUSD/GBPUSD.

EURUSD              Ask price is 1.17058

GBPUSD              Ask price is 1.27390

EURGBP             Ask price is  0.92345

Implied price calculation is as follow

·         EURUSD/GBPUSD = 1.17058/1.27390 = 0.91890    (implied value we get)

 

EURGBP = CURRENT MARKET PRICE is 0.92345 > 0.91890

So we can get profit if sell at higher price

BUY EURUSD

SELL EURGBP

SELL GBPUSD

I want to know is how much lot need to buy and sell to get profit in forex market.

How calculate profitable lot size for each pair.

Thanks you.

 

[Carl Schreiber]

Just search here (the lens on this page) for "triangular arbitrage".

There a plenty of solutions and ways to calculate this problem.

Bare in mind that there is almost nothing that has not been coded for MT4/5 yet. You just have to search for it!

[Sergey Golubev]

post #1 for more information collected

[LONNV]

Posible nearly answer is here

https://sites.google.com/site/marketformula/articles/triangular-arbitrage-101/triangular-arbitrage-lot-size

It seem to make

1lot EURUSD   BUY

1lot EURGBP   SELL

8.8 lot GBPUSD  SELL

Am I wrong ?

Welcome more discussion.

[LONNV]

At noon , when implied price less than current EURGBP price,

I traded as

1.5 Lot BUY EURUSD               is + 171usd

1.5 LOT SELL EURGBP             is -458 usd

1 LOT SELL GBPUSD                is +137 usd

total is - 140 usd

So my lot size is wrong?

Arbitrage trade is simutaneously trade to get profit within short time.

How you trade arbitrage in market?

[Enrique Dangeroux]

There are quite a few rather big problems with tri-arbitrage for a retail trader. 

In order to obtain a neutral position:

- The volumes needs to be exactly calculated. This is not possible with small lot sizes as it will distort a neutral position .

- Network latency can distort a neutral position.

- You can't use market orders, because slippage will distort a neutral position.

- You can't use limit orders either because you risk not getting filled and again will distort a neutral position.

In theory it will work, but unless you have the captial required, the infrastructure required AND a deal with a broker or LP to facilitate guaranteed filling at guaranteed prices, it is not going to happen.

[amrali]

You can find how to calculate tri-arb equivalent lotsizes in the attached script: https://www.mql5.com/en/code/25724