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TriArb Trader Light

TriArb Trader Light is the free version of the TriArb Trader Expert Advisor.

The free version trades only one triangle - EUR-USD-GBP.

Only the minimum lot is traded.

The TriArb Trader Expert Advisor implements the classic "triangular arbitrage" strategy, which is successfully used by many hedge funds.

"Triangular" arbitrage refers to a class of neutral-market strategies, in which the profit or loss of open positions depends not on the direction of the market movement as a whole, but on the relative changes in asset prices.

The EA takes advantage of the price discrepancies between the pairs and their crosses.

The advantages of the strategy

  • no risk that market reverses against your position;
  • no risk of 'stops' taking by a broker or market maker;
  • the strategy is neutral to news swings and gaps.

Risks of the Strategy

  • Arbitrage uses hedging, the cost of which may exceed the profit of the strategy;
  • Arbitrage positions may long stay in minus;
  • Delays in trade execution can lead to losses.

Arbitration strategies are difficult to implement in practice. That is why, they are widely used by hedge funds.

Principles of the strategy

In the interbank market, a cross-rate (for example of EURGBP or EURJPY) may deviate from the ratio (or product) of the rates of two currencies to the US dollar (for example, the EURUSD / GBPUSD ratio or the product of EURUSD x USDJPY /Hereinafter, such a ratio (product) will be called a synthetic cross-rate/).

The cross-rate can deviate from the synthetic cross, because the former depends on the demand and supply of the two currencies relative to each other, and the latter one depends on the demand and supply of these currencies to USD.

Such deviations create the possibility of arbitrage, which is called "triangular", because the arbitrage opportunity is implemented by buying and selling currencies in a triangle (buy EUR sell USD, buy USD sell GBP, buy GBP sell EUR - a triangle is formed).

Although market makers try to eliminate any deviations of rates, in times of strong market movements the market maker might not have the time to "level" the rates. As a result such "triangular" arbitrage opportunities arise more or less regularly (confirmed by numerous empirical studies).

The TriArb Trader EA

  • Uses a high-frequency trading algorithm.
  • Is Optimized for market execution (but can work in other modes).
  • Resistant to execution delays of up to 200 ms.
  • Automatically adjusts the "triangle" in case one of positions is not opened or closed by accident.
  • Can be configured to trade any combinations of currencies both in direct and reverse quotes.
  • Able to "pick up" a position previously opened on a different platform.
  • Allows for presence of other EA and manual trading.
  • Can adjust Take Profit depending on deviation and slippage when opening a position.

Description of the EA parameters and recommendations on configuration

  • Expert Advisor ID (Magic Number) - ID of the Expert Advisor, a unique number for each EA on the account.
  • Arb. period (ms) - period for checking the arbitrage conditions. The optimal value in the range 300-500 ms.
  • Min. deviation (points) - threshold deviation to open positions. The optimal value is in the range of 8-15 points for a five-digit account.
  • Take Profit (USD) - target profit (in the deposit currency) of all three positions, at which the EA will close the triangle. The optimum value ~ Min. deviation x Trading volume.
Andrey Litvichenko
7567
2017.10.16 16:19 
 

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