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Automated Currency and ETF Arbitrage Journal
- Thread starter robbob
- Start date
Quote from j2ee:
Thanks for your sharing. I have read your blog and it is very interesting. So your program is automatically trading 24 hours a day now? As I asked before, are you trading Forex future? Why would you pick HK dollars? I am in HK so I wonder LOL.
Ah ok I understand what you're asking. Yes the strategy is trading 24 hours a day, and its trading spot FX at IB, not futures (although I am working on a couple of strategies that will trade futures). The HKD/JPY rate exhibits some interesting price action, but I don't have historical data for the pair so I was able to backtest this strategy on it. So I'm trading it in a live account with minimal position sizes so I can see how it performs in actual trading.
Quote from robbob:
Thank You! Currently the strategy is just trading full position sizes with AUD/NZD and small position sizes with HDK/JPY, USD/SGD and EUR/DKK to get an idea of how they preform in a live account vs. IB's paper trade account.
I have a couple of other strategies that I trade as well as have a few different core positions held as long term investments. I'll likely get my overall monthly trading results since 2003 up on my blog at some point.
Interesting journal. Not the most popular of pairs and was wondering why specifically you have chosen the ones you are using?
Good luck
Quote from robbob:
Ah ok I understand what you're asking. Yes the strategy is trading 24 hours a day, and its trading spot FX at IB, not futures (although I am working on a couple of strategies that will trade futures). The HKD/JPY rate exhibits some interesting price action, but I don't have historical data for the pair so I was able to backtest this strategy on it. So I'm trading it in a live account with minimal position sizes so I can see how it performs in actual trading.
Cool. What is the main different between spot FX and future FX in IB? Spot FX can let you trade with smaller amount? I traded stock and future, but never tried FX.
Quote from hilojack:
Interesting journal. Not the most popular of pairs and was wondering why specifically you have chosen the ones you are using?
Good luck
Thanks. The strategy is a short term mean reversion strategy which AUD/NZD and EUR/DKK backtested well on. I didn't have any historical data for HKD/JPY, but the spread at IB on that pair is 1/2 pip and it *looked* like it may exhibit price behavior that would be conductive to a mean reversion strategy as well.
Quote from robbob:
Thanks. The strategy is a short term mean reversion strategy which AUD/NZD and EUR/DKK backtested well on. I didn't have any historical data for HKD/JPY, but the spread at IB on that pair is 1/2 pip and it *looked* like it may exhibit price behavior that would be conductive to a mean reversion strategy as well.
Gotcha. Spreads in FX mean reversion strategies can be system killers. U should look into a true ECN broker for such a strat. Unfortunately, IB is just like every other bucket shop which means that you are ALWAYS buying the offer and selling the bid.
Quote from hilojack:
Gotcha. Spreads in FX mean reversion strategies can be system killers. U should look into a true ECN broker for such a strat. Unfortunately, IB is just like every other bucket shop which means that you are ALWAYS buying the offer and selling the bid.
IdealPro at IB actually does operate as an ECN with banks acting as the liquidity providers. So you can place a bid and/or offer and see it show up in the IdeaPro order book and the order can get lifted potentially getting filled at a better price than the bid/ask. Their spreads on the majors are pretty competitive at 1/2 pip. And AUD/NZD average spread is around 3 pips, which is the best I've seen up to this point.
Quote from j2ee:
Cool. What is the main different between spot FX and future FX in IB? Spot FX can let you trade with smaller amount? I traded stock and future, but never tried FX.
With a spot transaction you are actually taking delivery of the currency, whereas a futures contract is for delivery at a later date.
The futures contracts have fixed amounts, such as 125k for EUR, whereas with currencies IB will allow you to trade any amount above a certain minimum on their IdealPro exchange.
Quote from robbob:
IdealPro at IB actually does operate as an ECN with banks acting as the liquidity providers. So you can place a bid and/or offer and see it show up in the IdeaPro order book and the order can get lifted potentially getting filled at a better price than the bid/ask. Their spreads on the majors are pretty competitive at 1/2 pip. And AUD/NZD average spread is around 3 pips, which is the best I've seen up to this point.
Yeah that's not bad for a retail account. How much is the commission?
Quote from hilojack:
Yeah that's not bad for a retail account. How much is the commission?
Commission is 0.2 ticks, with discounts if you do A LOT of trading ($1B+ in volume). I've heard brokerages such as Dukascopy have better/cheaper commission structures, but I'm not sure they can beat IB on the spreads, so maybe it ends up being a wash.