Digital currency triangle arbitrage tool
in addition, we need to meet the two conditions of good liquidity and low transaction cost
therefore, the most suitable one is: USD EUR JPY aud GBP CHF CAD, in which the prices of any three currencies are compared with each other
then put it into practice. The internationally popular algorithmic trading and arbitrage hedging are dominated by big investment banks, which rely on the computing power competition of computer groups and even servers. Some investment banks even spend a lot of money to move the whole company close to the exchange in order to pursue a little advantage in network speed. The EA you studied is the most rough, backward and simple algorithm. It really has no future.
Cross arbitrage refers to the international arbitrage in which investors buy cheap and sell expensive at the same time when the arbitrage exchange rates of three or more currencies are different from the actual published exchange rates
for example, in bank a, the exchange rate of US dollar in Dutch dollar is 1.9025fl / $, in bank B, the exchange rate of US dollar in Canadian dollar is 1.2646c $/ $, and in Bank C, the exchange rate of Canadian dollar in Dutch dollar is 1.5214fl/c $. According to the quotation of Bank A and bank B and the calculation of cross exchange rate, we can get the price of Canadian dollar in kilde as follows: (1.9025fl / $) / (1.2646c $/ $) = 1.5044fl / C $
the cross exchange rate level is different between Bank C and Canadian dollar, which means that there is arbitrage space. Because the exchange rate of Canadian dollar of Bank C is higher than the result calculated by cross exchange rate, it shows that one unit of Canadian dollar has a higher value in bank C. Therefore, if one unit of Canadian dollar is exchanged for one unit of Canadian dollar through the transaction between bank a and bank B at the rate of 1.5044 kird, and the Canadian dollar is exchanged with Bank C at the rate of 1.5214 kird, then a triangle arbitrage of 0.017 kird will be obtained
triangular arbitrage process: the exchange rate calculated through cross exchange rate is different from the actual exchange rate in the market, resulting in arbitrage space in the market. Market participants can buy and sell foreign currencies among different banks at the same time, so-called triangle arbitrage
, first judge whether arbitrage and arbitrage direction can be realized, The first market: US dollar 1 = sfr1.5971
the second market: Australian dollar 1 = $1 / 1.8215
the third market: Swiss Franc 1 = a $1.1440
exchange rate multiplication: 1.5971 * 1 / 1.8215 * 1.1440 = 1.0031
not equal to 1, favorable for right set, greater than 1. Starting from the market with us dollar as the base currency, the market with us dollar as the base currency is the first market, Exchange it into Swiss Franc in the first market, yuan in the third market, and US dollar in the second market, minus arbitrage investment, which is profit:
1000000 * 1.5971 * 1.1440 * 1 / 1.8215-1000000 = US $3064.73
which is called the current price. It is a price between the purchase price and the selling price quoted in the actual market, not necessarily the median value. If you multiply or divide two of the three varieties, you can get a value similar to the current price of the third variety. If there is a difference between the similar value and the current price of the third variety, if you can trade at the current price, then since there is a difference, you can definitely make money, as long as you are long and short
however, if a dealer wants to make money, there will be a little difference, that is, there is a gap between the tradable price and the current price, and this gap has always been detrimental to you, and has been increasing your cost. If there is triangle arbitrage, each variety has to pay a handling fee. In standard cases, the handling fee is generally 2% - 3% or higher of the margin
OK, assuming that there is still a profit margin in the case of high cost above
the third problem is that many people are not clear about the standard of foreign exchange contract. Since it is arbitrage, the arbitrage I understand is generally the same thing. If you buy cheap from a and sell expensive from B, the contract is signed almost at the same time, but I don't remember the foreign exchange very well, The standard hand at the beginning of USD represents the contract value of US $10W, while the standard hand at different beginning of other contracts has different contract value. Therefore, when arbitrage, the quantity control should be well planned in advance. Otherwise, if you buy 2 tons in a and 1 ton in B, you will have to bear the risk of the remaining one ton, which is not risk-free arbitrage.