Winningpip Demo Journal - My Research

[Winningpip]

i wanna do some research about Triangular Arbitrage

Triangular Arbitrage is one of the forex trading strategies utilizing the imbalance value of the three currencies,
Example : GBP / USD, EUR / GBP, and the EUR USD,

the formula = GBP / USD x EUR / GBP = EUR / USD,
if the conditions are GBP / USD x EUR / GBP # EUR / USD,
then the triangular arbitrage opportunities arise.
This strategy practiced manually is difficult, because of the scarcity of opportunities that arise, and need the speed and timing to execute the order, because it is usually run by using softaware.


Here is my basic concept

Triangular Arbitrage

Currency formula (CF):
GBP / USD (GU) x EUR / GBP (EG) = EUR / USD (EU
Description :
GU price multiplied by EG must be equal to the EU

The Triangular Arbitrage Formula(TAF):
GU x EG # EU
Description :
Triangular Arbitrage arises if:
GU price multiplied by the price of EG is not the same as the price of the EU at the time

Entry Rule:
1. If the EU CF> EU TAF by a margin of at least 12 pips then we open trades: EU buy, sell EG, & sell GU
2. If the EU CF <EU RTA by a margin of at least 12 pips then we open trades: EU sell, buy EG & buy GU
3. We will not open trades if the difference is less than 12 pips

Lot used in TAF for each currency:
1. EU = 1 x lot (mini, standard)
Examples 0.10 or 1.0
2. EG = appropriate price at the time GU x lot (mini, standard)
Sample price GU 1.6381 then we open 0:16 or 1.63
3. GU = appropriate price at the time EG x lot (mini, standard)
Examples EG 0.7210 price then we open 0.72 or 7:21

Exit Rule there are 2 options:
1. Take Profit with the following calculation: the difference in pips (ex: 12) - total third spread currency (ex: fx version 8 open) = profit (4) x lot (1) = $ 40
2. Exit when price is in conformity with the CF

Sample case Using tickmill brokers
Prices on the chart, namely: GU 1.6381, EG 0.7210 and 1.1823 EU,
with spreads are 1.3 for EURUSD, 1.7 for GBPUSD , and 2 for EURGBP

and then triangular arbitrage opportunity appeared, because GU x EG # EU.
Value EU CF is supposed to 1.1811 due to the smaller than EU TAF by 12 pips,
then we open trades sell EU, buy EG and buy GU
With the lot size EU 1,
EG 1.63 (according to the price GU)
and GU 0.72 (according to the price EG that time )
We will take profit formula pips difference minus the total spread, ie 12-5 = 7 x 1 lot = $ 70

But i will do it with a twist
Instead i am wait the triangular opportunity
i will enter trades blindly, no analyzing anything

and only with this lotsize formula
XXX/USD = 1
YYY/USD = Lot size depend of XXX/YYY Price
XXX/YYY = Lot Size depend of YYY/USD price

For Example GBPNZD Trade below

 

[Winningpip]

Closing my GBPNZD +40pips in my research account.
not bad result

 

[Winningpip]

open another Tickmill demo and compare 2 diffrent trades

 

[Winningpip]

intresting result with my Tickmill demo account
need more research

 

[NewStarS]

Its sounds like 3 pair hedging. Interesting.
Also thanks for sharing the tick mill screenshot for spreads. Its bit high.
I thought they were an ECN broker.

 

[Winningpip]

Its sounds like 3 pair hedging. Interesting.
Also thanks for sharing the tick mill screenshot for spreads. Its bit high.
I thought they were an ECN broker.

Its Tickmill Demo Account and i think their demo based on their Classic account spreads , which is starts from 1.2 pips for EURUSD

and the ECN account of course offer diffrent spreads,
but it depends on your need, people like me do not like pay commision for the brokers

yeah its 3 pairs hedging

 

[valuetrader]

how to trade all these pairs from india?