Which arbitrage strategy is more suitable for me?

The HFT Arbitrage Platform contains five built-in arbitrage strategies. Each strategy has a different algorithm and I would like to focus on that first.

Built-in arbitrage strategies – description of the algorithms

Latency arbitrage built-in strategy

The latency arbitrage algorithm is based on the fact that different brokers receive quotes at different speeds and occurs for several reasons:

• internet delays
• Delays in equipment (bridge, server, liquidity aggregator)
• The difference in quotes between different liquidity providers

Latency arbitrage bot

The algorithm works in the following way Latency Arbitrage bot in real time compares the quotes coming to the slow broker (that may be MT4, MT5, cTrader, or FIX API broker, as well as the cryptocurrency exchange) with quotes of the fast broker (the so-called fast feed). As soon as the price at the fast broker exceeds the price at the slow broker by a given amount, for the same trading symbol, there is a signal to buy. And vice versa as soon as the price on the fast broker becomes lower than the price on the slow broker by a certain preset value, there is a signal to sell. The arbitrage robot sort of peeks into the future and sees in what direction the price will move in the next seconds. The description of the algorithm is simplified for understanding the essence of the latency arbitrage robot’s work, but it contains a lot of additional modules allowing to produce accurate tuning of the latency arbitrage program.

2-Legs Latency 1 and 2-Legs Latency 2 arbitrage bots

These two strategies have a similar algorithm and are an upgrade of the lock arbitrage algorithm. Lock Arbitrage is a variant of Latency Arbitrage but the basic idea is that long before an arbitrage situation occurs, the program of lock arbitrage opens two opposite orders on the same trading instrument in different accounts. Opposite orders on the same symbol with the same (or almost the same) volume are called lacquering orders, which gave the name to lock latency arbitrage. As soon as the price at the fast broker exceeds the price at the slow broker by a given amount, on the same trading symbol, there is a buy signal. But instead of buying, we close the opposite sell order and open it a few seconds later on another account, thereby locking in a profit. And vice versa as soon as the price on the fast broker becomes less than the price on the slow broker by a certain predetermined amount, there is a sell signal and we close the buy order. This algorithm allows us to keep the orders open for a long time without fixing the profit of 1-2 points by closing the order, thereby masking latency arbitrage. 

2-Legs Latency 2 arbitrage differs from 2-Legs Latency 1 in that one account is used, which was opened with a broker and works well for Latency arbitrage, and the orders are permanently open on it, and the second account is used only for the locking orders which are constantly being reopened on this account.  The description of the algorithm is also simplified for understanding the essence of a locking arbitrage robot, but in reality, it contains many additional modules allowing you to fine-tune the locking arbitrage program.

2-Legs Latency 3 arbitrage bot

Is an improved, from the point of view of masking arbitrage trading from forex broker, algorithm 2-Legs Latency 1.

2-Legs Latency 3 strategy works on two accounts, with one or different brokers, as well as 2-Legs Latency 1, but 2-Legs Latency 3 strategy never locks orders on the same trading instrument in one account. That means you won’t see two BUY EURUSD and SELL EURUSD orders in one account. Orders are opened on a low volatility market without any arbitrage situations, and 2-Legs Latency 3 does not capture 100% of profit like 2-Legs Latency 1 does when a trailing stop triggers, it only captures a part of the profit. Further, we believe that the arbitrage signal is a good signal indicating the market direction in the next few minutes or hours, a so-called impulse. For this reason, we set several profit-taking levels in the direction of the arbitrage signal. This allows you to have 50-80% of orders open or closed not at the time of the arbitrage signal and makes this arbitrage strategy well masked and bypasses all sorts of anti-arbitrage plug-ins.

Hedge arbitrage bot

is not a kind of latency arbitrage and its algorithm is based on comparing quotes on two different brokers if there is a difference by a specified value, the Hedge arbitrage bot opens the arbitrage orders. For example, if the price on broker A is higher than on broker B by a given amount, the value of the arbitrage program will sell the asset on broker A and buy it on broker B, thus fixing the profit. Then the program will wait for the opposite (when the price on broker A will be lower than the price on broker B) arbitrage situation to close both of the hedging orders as you can see the strategy does not use a fast feed. The description of the algorithm is also simplified for understanding the essence of the human arbitrage robot, but in reality, it contains many additional modules allowing you to fine-tune the robot.

What is the most suitable arbitrage strategy for me?

Comparative table to help you choose a strategy or strategies for your needs