IB forex trading cost VS fx futures cost

[i960]

Yep. Anyone thinking they can make free money on the spread between futures and forex for related currencies is going to be disappointed. Additionally even if there is a few ticks there (we've all looked at some point) this is not necessarily riskless.

 

[GloriaBrown]

Leverage isn't a magic word! You're not going to find tradable arb opportunities in forex, full stop. Maybe you don't define arbitrage as a risk free trade exploiting differences in pricing for fully fungible securities? Because that isn't possible for a retail trader, leverage is irrelevant. If you've got your own definition of arbitrage, let everyone know so we're all on the same page. A big hint, you need to understand roll rates if you think the difference in spot and future price represents an arbitrage opportunity.

I mean epchan kind arbitrage, see his book or blog.

 

[Sig]

I mean epchan kind arbitrage, see his book or blog.

Its probably worth reading Epchan himself on this topic then, http://epchan.blogspot.com/2012/03/high-frequency-trading-in-foreign.html To summarize, its exlusively the domain of high frequenc traders and even he doesn't feel he has the ability to do it.
If you are talking about trading currency pairs that you think are highly correlated over a period of days and months rather than ms, then I'd say that rather than arbitrage. If you're trying to do that, then futures are your best bet. This is because all spot brokers make money on the roll, where as in futures you get as close to the interbank interest rates on the two currencies as is possible for a retail trader. If the currencies you want don't have futures, then find the spot broker with the best roll rates. It most probably won't be IB, who do give you fair execution but have both a quirky calculation method and very bad interest rates which translate to what have to be among the worst roll rates in the industry.
The other issue you need to take into account is moving money between two different brokers if you have your hedge split between futures at one broker and spot at another. Even if you're perfectly hedged, if the futures side goes against you, you'll have to move money from the spot account to the futures account to stay in margin. This is almost never an instantaneous process, even with wires expect 24 hours start to finish. By that time you could have easily been auto-liquidated on one leg, even though your overall position across brokers is up.

 

[Xela]

For all the reasons stated above, and then some, you can't possibly realistically do this kind of arbitrage consistently profitably as a "small retail trader", Gloria.

Dealing-costs and time-lags will kill you, unless you have dedicated servers setting next to the exchange with a 10 microsecond ping to the exchange and execution server, and have really powerful high-frequency trading algorithms working overtime.

 

[debitspread]

Of course. But the siren song of free money is so enchanting...