The classical arbitrage in the forex market


There are loads of instruments for the financial market analysis in the fix api forex market. They allow conducting a stable trading. Both algorithmic and manual strategies can be referred to these instruments. However, today we are going to examine one of the very first ways to commit speculative positions, namely the classical arbitration approach.

The arbitrage is a kind of trading, in which all analysis is reduced to determining exchange rate differences of the same financial asset, but on different stock exchanges. It is not based on the analysis of the historical movement. This approach allows you to conduct risk-free trading and accumulate a large percentage of return at the same time.

Considering the classical arbitrage, it is crucial to understand that there are several types of it, which can be applied to the currency market.

  1. Fix api 2-leg Arbitrage;
  2. Fix api Latency Arbitrage;
  3. Triangle Arbitrage.

So, this is the first type that can be attributed to the classical forms. This principle was used in the stock market when the value of the same financial asset was significantly different on different exchanges (for example, in London and Japan). Considering the foreign exchange market, fix api arbitrage has become a reality. It happened because the multiple brokerage companies which act as these different platforms had opened.

Let’s look at the example in order to understand the algorithm of classical arbitrage in more detail.

The value of the currency pair USD/CHF in one broker is 1.0215, while on the other platform it is 1.0235. Thus, the discrepancy between the same currency pair is 20 points. In this situation fix api trader can make an arbitrage trading operation, which will consist in buying USD/CHF from the first broker and selling on the side of the second one. When this discrepancy would decrease to 10 points, the manager will close both positions. Let’s imagine that the value of the currency pair will be 1.0278 and 1.0288, respectively. Then, according to the first operation the profit will be fixed at a rate of 63 points, and according to the second one the loss would be fixated at a rate of -53 points. The total financial result for the two operations will be +10 points, which the trader had received without any risks.

The algorithm of the arbitrage methodology is quite simple. However, it is complicated, while committing trading operations manually. It is because the forex market is the most volatile one and the ordinary person finds it very hard to follow its dynamic, especially if we are talking about the analysis of two different accounts and financial assets at brokerage firms.

That is why particularly this type is amenable to algorithmization and has become one of the first systems that were implemented in HFT trading. Trading robots written on the arbitration strategy are in a great demand among various participants of the exchange trade (http://forexzzz.com/ru/product/forex-zzz-lock-arbitrage/).

So, the algorithmic approach in arbitrage trading allows:

  1. Conducting a continuous analysis of financial assets on various stock exchanges (fix api forex brokerage companies);
  2. Increasing the profitability of investment capital while having minimum or zero risk parameters;
  3. Using fix api to get the most up-to-date and timely data. It allows you to increase the profit potential and thus deprives you of the need to use the server and open accounts in “fast” broker companies;
  4. Using the faster and the slower broker for the manual trading or trade via fix api, which is suitable for arbitrage trading;
  5. This algorithm is not based on the graphical analysis (https://freshforex.org/training/interactive/forecast/graph-analysis/), and therefore can easily be combined with the manager’s manual strategy in the currency market, regardless of its type and internal algorithm of actions.

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