wrong totally on the point... maybe you will be my first entry on my ignore list
Bucket Shop Arbitrage
- Thread starter Sodajerk
- Start date
wrong totally on the point... maybe you will be my first entry on my ignore list
sadly dude... the explanation is written in the line above... just read.
No, since I don't use bucket shops. What I wish to discuss here is an as yet untested idea based on well-tested principles. I am taking for granted that there is a significant amount of truth to the persistent talk of "individualized" quotes by certain bad actors in the forex business who should be ashamed of themselves like the naughty boys they are.
The intellectual competence of the responses for and against will help determine whether bucket shop arbitrage should be developed as a strategy.
Hello all, I usually don't link to other boards, but since the subject of Spot Currency "Hedging" has been coming up recently here is a link http://kreslik.com/forums/viewtopic.php?t=307 I did a bit of informal inquiry, and I found out Michal is a Hot Shot programmer but not a full time trader. If you read through the WHOLE 70 some pages you will see where he starts with this, and where he ends up. An interesting read FWIW.
The Ever Skeptical And Venomous VIPER
The Ever Skeptical And Venomous VIPER
I don't know why everyone is so down on Sodajerk.
The strategy he mentions is very old and very well known. Several big time traders in the Market Wizards book used the exact same strategy, whenever different marketplaces would diverge.
Since the divergences are somewhat random, you take your profit by waiting for a chance convergence, or a divergence in the opposite direction.
However, there are several problems at the retail level.
1. Some of the people that have used this strategy in the past actually had a way of buying something (a stock, or a futures contract) in one market and then selling it in another. The actual trade only lasted seconds and only incurred two commissions. I don't know the details of how that is done but I know that retail traders can't do it.
2. I think it's unlikely that the divergence would exceed the spread, although I don't really know. I understand that forex spreads are pretty wide.
3. You've got to overcome the spread again when you take your profit.
4. As a practical matter, you've got to have the ability to simultaneously execute before the divergence disappears. You'd probably need a custom computer program that can interface to two different brokers simultaneously.
In short, it's a good concept, but it's probably not practical at the retail level. Although it's certainly worth investigating to find out for sure.
The strategy he mentions is very old and very well known. Several big time traders in the Market Wizards book used the exact same strategy, whenever different marketplaces would diverge.
Since the divergences are somewhat random, you take your profit by waiting for a chance convergence, or a divergence in the opposite direction.
However, there are several problems at the retail level.
1. Some of the people that have used this strategy in the past actually had a way of buying something (a stock, or a futures contract) in one market and then selling it in another. The actual trade only lasted seconds and only incurred two commissions. I don't know the details of how that is done but I know that retail traders can't do it.
2. I think it's unlikely that the divergence would exceed the spread, although I don't really know. I understand that forex spreads are pretty wide.
3. You've got to overcome the spread again when you take your profit.
4. As a practical matter, you've got to have the ability to simultaneously execute before the divergence disappears. You'd probably need a custom computer program that can interface to two different brokers simultaneously.
In short, it's a good concept, but it's probably not practical at the retail level. Although it's certainly worth investigating to find out for sure.
this used to work a lot a few years back. You'd get A quoting say 45/46 and B at 47/48 so you'd buy 46 on A and sell 47 on B. Net across both you're flat. Depending on your account and order size you can choose to just leave it at that for a while or square up your position when an opportunity arises, say when B's offer is <= A's bid. This used to work quite well on the older metatrader platforms cos it could all be automated between numerous brokers
The ignore list work well !
1) You need to find brokers that consistently give off-market quotes and let you trade them. Good luck with that.
2) You need to overcome two spreads plus slippage.
3) You may need to move money between accounts to avoid margin calls. This adds further costs that need to be overcome.
4) You are at significant risk of an execution problem affecting one side of your hedge.
2) You need to overcome two spreads plus slippage.
3) You may need to move money between accounts to avoid margin calls. This adds further costs that need to be overcome.
4) You are at significant risk of an execution problem affecting one side of your hedge.
The problem with the OP's strategy is that all the other markets where this type of arbitrage exists and could be potentially exploited are not rigged markets.
Because you are being bucketed on both sides, there are too many assumptions that have to be made. For example, what's the size at each price level?
The only possible outcome I could see happening is that the OP would lose on BOTH sides of the trade, even though in opposite positons.
Can I be your introducing broker when you go live with this LOL?
Because you are being bucketed on both sides, there are too many assumptions that have to be made. For example, what's the size at each price level?
The only possible outcome I could see happening is that the OP would lose on BOTH sides of the trade, even though in opposite positons.
Can I be your introducing broker when you go live with this LOL?