I read something about using triangular arbitrage, or using more currency pairs to find arbitrage setups?
Anyone hear of statistical arbitrage ea, that can analyze multiple pairs to find mismatches to exploit?
Is it possible to use this in a forex market? Would it only be possible with a true ECN broker?
I sort of understand how arbitrage works, but if someone could explain more I’d appreciate it.
While it’s good to understand the theory, don’t waste any time thinking about trying to create a system. The market makers’ quoting systems automatically adjust to reflect proper triangular alignment each time the value of one side changes.
The point is that while the market does correct itself, there is some delay of this especially during volatile market periods. I would never be able to find and execute these orders fast enough, but an EA may be able to. By using an EA to compare live prices, one could in theory find 3 pairs that do not line up correctly. The point of doing this is that it would provide a 100% win situation in any market condition, making thinking about a very good idea I would think.
It’s not a question of the market correcting itself. Keep in mind that forex is an indication based market, not a trade based one. The prices you see are not necessarily traded prices, but rather prices where trades can currently be made. Those quotes are automatically generated by market makers and the systems they use will not allow for that triangular arbitrage.
You’re welcome to try it out, of course, but I’m sure that when you account for the spread (and transaction costs if you’re dealing with an ECN) you won’t actually find an opportunity worth pursuing.