The 2 leg latency arbitrage


Each experienced trader, who has more than 10 years of trading experience has probably noticed how the trading process has changed. The list of trading instruments, derivative financial assets, and methods of market analysis significantly expanded through time. The new postulates of understanding the market trends appeared, such as the Elliott waves or the Williams’ “Trading Chaos”. Some of the popular trading systems are still successfully used. The complicated strategies have become more understandable and feasible due to the automated algorithm. Those things, that seemed unrealistic before have become easily applied in the nowadays trading. It all has become possible by virtue of the HFT trading, which makes possible such a trading that an ordinary trader finds as too complicated.

The core of the HFT trading lies in completing transactions of buying or selling in an automated mode with a help of the FIX API brokers. Thus, the profitability and trading result increase. Nowadays HTF is used by almost all investment companies, as it allows accomplishing such trading types, which are not possible for manual trading. It is also popular because of its simplicity of private traders. FIX API 2 leg latency arbitrage strategy is one of such trading types.

2 leg latency arbitrage or a “hedge arbitrage” is an arbitrage trading type that simultaneously opens a buying and selling deal of the same currency pair from the different brokers.

For reference: an arbitrage is a trading strategy that is based on a high-frequency trading for making speculative positions on exchange differences for the same asset (or derivative). It is usually done on various trading platforms.

It is crucially important to work via the fix API forex broker for a successful performance of 2 leg latency arbitrage strategy.

Here is how the 2 leg latency arbitrage works

The whole idea of this technique lies in its name, as the robot simultaneously buys and sells the same asset. The two different platforms are required for such trading. As a rule, these are two different broker companies. But what is the main idea of such trading?

Let’s investigate an example in order to understand the logic of the trading robot:

The EURUSD currency pair costs 1.07255 from one broker, and 1.07250 from the second one. Exactly these 5 pips of the difference are the profit. The robot will open the sale from the first and purchase from the second broker. It is not necessary to determine which broker would be “faster”, and which “slower”, however, it is needed for the second form of arbitrage trading – Fix API latency arbitrage.

What are the advantages of 2 leg latency arbitrage strategy?

The key advantage of this trading type is its simplicity. It is not necessary to determine which broker gets quotes faster. There is no need to constantly monitor the trading specifications of the brokerage company.

The second advantage is that such transactions are difficult to track. It is because the trading can be held for a few seconds. It is hard to identify the logic of the transaction, as the second part of it is done via another company. Thus, the broker can not affect the outcome of the trade.

Trading in the financial market is increasingly attracting attention with its simplicity. You can create a full-fledged trading algorithm that will consider all details of HFT trading with the help of public API fix programming languages ​​- java, C # or python. An unlimited access to any platform in the world would allow you to commit trading transactions without leaving home and turn the algorithmic trading into a passive source of income.

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