Well, there is such a type of advisers, which means you need to describe it. Use what is called at your own risk. Personally, I would not recommend doing this and explain below why.
So, “arbitrage advisers” – this type of advisors that works as if simultaneously for 2 brokers – the “fast” broker and the “slow” broker. It happens that one broker provides a price quote faster than another: for example, the Forex price has increased from 1.0200 to 1.0210. One broker showed this change after 0.1 sec., And another – after 0.3 sec.
The purpose of an arbitration adviser is to keep track of this price change at a “fast broker” and enter the SAME DIRECTION of a slow broker BEFORE he realizes it. Those. it turns out that within a split second we know “where the price will go” from a slow broker, and we are trying to use it for our personal purposes. It sounds like a way to get rich quick on paper, right? 🙂
For the use of this type of advisers to make sense, you will need:
- Extremely strong computer and strong enough Internet to be able to seize this chance. Otherwise, even a small delay for any of these reasons makes the use of these advisers meaningless, because brokers, as a rule, also have quite substantial capacities in their arsenal, with the help of which price quotes are “delivered”, and their purpose, of course, minimize the time of this delay.
- The smallest possible spread. The adviser will enter market orders. This means that if the price of the “fast” broker has changed by 1p, and the slow broker has a spread of 2p, then closing the position will be at a loss for you (here is an example with a picture). Therefore, the way out of the situation is as follows:
- We select the type of account with a floating spread. Fixed spread accounts generally do not give a sufficiently small spread. With a floating one, the spread depends on the time of trading – it narrows in the “popular” time and expands in the “illiquid”
- Trade only in liquid times (when a lot of people spread as narrow as possible). Those. forget about night trading immediately. Liquid time is the first 2 hours of the European session and the first 2 hours of the American session (whoever independently finds and compares this time with their time zone is on the way to becoming a professional trader)
- Continuous monitoring of news releases. As you know, during the news the spread is catastrophically expanding. If the adviser decides to go during the news (and he probably decides), the result may be a catastrophic loss for your deposit when closing a position. The situation is the same in essence as when trading in illiquid times. Remember – for profit, we need both a good deal entry and a good exit.
- It will require a special program that tracks both brokers and the adviser’s work on them. Usually, it is provided together with an adviser, and there are quite a lot of these programs, therefore this question also goes for the reader to study independently. However, if there are any questions – write in the comments, try to figure it out together.
- Testing, testing, and testing again. Below I list the conditions in which it makes sense to test the adviser:
- Liquid time (the best conditions. If the adviser does not work in them, you can immediately throw it away)
- Time with average liquidity (This is the European and American session as a whole, except for the first 2 hours, which are the most liquid). If it works – excellent because this time will add to your “variability” and expand opportunities for earning
- Nighttime (Asian and Pacific session). If you find a fast and slow broker that provides a narrow spread at night – this is generally a paradise for this type of adviser. We just turn it on for the night, go to sleep, wake up and see (ideally) on the account honestly (well, how to say) earned (there can be no doubt, after all, it is necessary to correctly configure everything) profit (if the conditions for the spread are really good).
- News time (Here we are talking about the release of “important” news – with 3 “stars”.
The most hardcore, but also potentially the most “bread” time. Honestly, I don’t think that at some brokers during the news the spread does not expand much, but you can still search. If you find it, then it’s a paradise in general: the movements during the news will be sharp and strong, and therefore, the delay can be significant + profit much larger than 1-3 pin standard, even liquid time.
In summary, we take these conditions and test them from top to bottom. If at some time the adviser “mows” – for this time we simply turn it off, as common sense tells us.
Now the reverse side of the coin:
- Of course, most of the “tricks” during the existence of Forex for private individuals have long been studied, and preventive measures have been tried and implemented. Those brokers that have existed for a long time are popular just because of the high-quality provision of services for customers, which involves the provision of quotes with a minimum delay and, as a result, the improvement of their equipment for these purposes. Therefore, in the current environment, finding a fast and slow broker is quite difficult. Yes, there may be times and periods when one broker is slightly slower and the other is slightly faster, but again these periods need to be monitored.
- As a consequence of paragraph 1, a situation may arise where the “fast” broker and the “slow” broker can “swap places.” Here it is already necessary to check the properties of the adviser – whether it can “work in 2 directions”, adapting to such a situation or not.
- The rules of most brokers prescribe the parameters of trading, aimed precisely at preventing the trade of arbitration advisers, including:
- Limitation on the time of existence of an open position (as a rule, at least 1 minute). The property of arbitrage strategies, on the contrary, is the extremely small “retention” of the transaction, therefore, even if it is possible to make a profit based on the results of the auction, it is very likely that profitable transactions can simply be canceled according to the given paragraph
- Limit on the minimum take profit. The trick here is that arbitrage strategies again have extremely small take, unless, of course, you trade during news movements – there might be more. But if most of your transactions will be closed with a profit in the region of 1-2 points – most likely, they also will not pass the fate of canceling the results according to this point.
- A direct ban on the use of arbitration systems. Here, I think, there is no need to comment.
- There is also a technical side that can interfere with you even if you find loyal brokers with the desired difference between their quotes. For example:
- Requotes. If, for example, you send a purchase order to a “slow” broker following a price increase by a fast broker, there is a chance that your transaction with a “slow” broker will not be completed. The scheme is as follows:
- You send a slow broker an order to buy at 1.0200 because the fast broker has a price of 1.0202,
- While your order goes to the server of the slow broker, he receives a fresh quote at 1.0202
- Your purchase order for 1.0200 comes to the server to the “slow broker”. He cannot execute it at the price of 1.0200, because the current price is already 1.0202
- He suggests that you execute your order at 1.0202, but the moment has already been missed;
To avoid this, as I wrote above, you need a powerful computer, super-Internet and smart software complete with an arbitration adviser and a dealing center that has not yet gotten bumps.
Otherwise, get tired of clicking “cancel” in such cases =) There is still a sound during the requote so nasty, brrr …
- Slippage. Arbitrators usually have very short stop losses (if any). Therefore, if an adviser opened a position, for example, to buy at a price of 1.0202, setting a stop-loss at a price of 1.0200 (2 points), and at that time there will be a strong downward movement on the market, then the stop-loss for the transaction can be much greater (mechanism we examined the topic of advisers-scalpers). Based on this, the entire risk management collapses: a much larger number of profitable transactions will be required to recoup the result of such losses, the magnitude of which, in essence, is unpredictable. You can find more about why stop loss at a lower price can be found in this video ).
I repeat, decide for yourself, but I believe that it is easier and calmer to use other types of advisers, given their diversity and the legality of making a profit with their help. I understand that, probably, every person has a desire to “deceive the system”, so here you need to make a choice that your priority is a calm, systematic study of the intricacies of Forex earnings or the likelihood of faster enrichment with the risk of “getting caught” and not getting anything, subsequently starting all over again.
Advisor Trade arbitrage belongs to the class of arbitration and for its correct operation, as mentioned earlier, you will need quite powerful equipment.
If all of the above types of advisers were, so to speak, for lovers of adventure, then their following “colleagues” are suitable for lovers of calm and unhurried trading. I note that between the “adventurer” and “leisurely” in terms of trading, there is no graduation in terms of professional development – history knows both profitable scalping enthusiasts and profitable medium and long-term ones. As elsewhere, you, dear reader, should try everything and choose what is “closer”.
For me, arbitration is a pure cheating system and not fair trading, and I do not support it, firstly for ideological reasons, and secondly because of the risk of being left with nothing but the time spent.