Latency Arbitrage, is this the way to go?

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Latency Arbitrage, is this the way to go?

Postby patrick93 » Tue Dec 29, 2015 2:12 pm

Dear SHF.com trading community,

recently I have read a lot about FX Arbitrage and I'm very interested in making money by Latency Arbitrage.

For those who don't know what Latency Arbitrage is:
First, you have to have a data feed from a very fast Data Provider such as CQG or LMAX
Then you need Provider which has a slower data feed i.e. Market Makers
When the fast Data Provider's price has a larger movement and exceeds the spread from the slow Broker, then an EA should take a trade in that direction.
It's not like you win every trade because of bad execution sometimes, but you should be very profitable overall.
Sure, newbies who now heard the first time about this might think this is the holy grail. :!!:
But FX arbitrage is not new and many brokers are refusing withdrawals if you do so. They're not dumb, at least most of them.
Nevertheless, there are a few brokers who don't notice your arbitrage scalping if you are not making 40.000% account increase on one day.
There is another reason why I keep being interested in it: there are Market Makers who allow scalping, and you could be faster though if you have a fast VPS with a fast Data Feed.
I have seen a few bucket shops who could be exploited, and I would be so happy to take money from the criminals and I also think you would be too. :smile:

Now why am I here?
As you might have noticed, there are many people who offer their Arbitrage EA's for thousands of dollars, providing no trial or anything else. I really don't know what to think about it, there is one who even shows his Investor Password on live accounts. But as long as they don't provide a free trial for at least a few days, I don't want to throw away my money. If there is some interest, I can share the websites name, but as I don't want to advertise something, I will keep this to myself for now.
It is ABSOLUTELY IMPOSSIBLE to do this manually. Trades are taken within a few milliseconds so checking the conditions can't be done manually.
Also, I have not enough programming skills so I can't do it on my own. I just know that it can be done with FIX API on Empty4, but I have no idea how challenging it is to create such an EA.
This is not like any other Empty4 EA because it has to take data from external sources. So it MAY also be done by a bridge.dll.
I came here because I have seen such amazing programming skills on SHF.com .
I also hope there are members who want to help improving this EA, e.g. finding out more brokers where you could use arbitrage.

What should the EA do?
  • Compare the price of the fast Data Provider with the slow one
  • Check spread of the broker that you want to be trading with
  • If price difference exceeds the spread, take trade in the direction of the fast one
  • Exit trade when the price difference is lowering
  • Be insanely fast. I know this is hard to accomplish, but the faster the EA is, the larger edge we have

Am I willing to pay for it?
As I want this to be a community project, the best would be to make it free .
But as I respect the programmers efforts and time, I don't mind paying for this EA, as long as I don't have to pay 1.000 dollars.
For improving this, I want to share this here so everyone can use it for a limited time which can be extended, like HGI.

I hope that I now have the interest of at least some of you. If you think my idea is rubbish, please let me know why.

Sincerely,
Patrick
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Latency Arbitrage, is this the way to go?

Postby SteveHopwood » Wed Dec 30, 2015 10:40 am

patrick93 » Tue Dec 29, 2015 2:12 pm wrote:I hope that I now have the interest of at least some of you. If you think my idea is rubbish, please let me know why.

Not rubbish but you have two problems in attracting attention to all this.

The first is the amount of invaluable trading information available here at SHF is so vast that not many are going to be interested in something that appears to require a lot of faffing around. I find myself asking, "Why bother with this when there are threads here that will teach people to trade properly?" I may be wrong, We shall see.

The second is that Empty4 is so slow. I don't think it is the platform for something that has to be executed in milliseconds.

All I am really doing by posting here is attracting attention to your thread, just in case there is interest amongst traders who might otherwise miss it. I hope you are successful.

:xm:
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Latency Arbitrage, is this the way to go?

Postby xfactornos » Wed Dec 30, 2015 2:15 pm

This has been around for years and its illegal, the brokers will NOT honor any profits made by Arbitrage. Its in their TOS and they will close your account if you even attempt it. There are tons of bots already out there that do this exact thing. They are useless because no one honors it. Some call it HFT, Arbitrage, Latency trading, they are all the same thing. Any trades that are 3 seconds and under are not honored.

Ask your broker and see what they say.

Just my experience with the stuff.
John 3:16
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Latency Arbitrage, is this the way to go?

Postby Jemook » Thu Dec 31, 2015 7:19 am

If you are going to give it a go you can use our feed on Empty4 as the source. We refresh ticks every 20ms so there are quite a lot of ticks coming through compared to most feeds. Yes, latency arbitrage does work on some b-book brokers and yes they probably will come up with an excuse as to why you can't keep profits. Can't hurt to try though, you can learn something about FX from any type of trading.

IMO it's as pointless as news/tick scalping which will only work on a b-book feed. If you can find somewhere that will let you do it then great but your chances of a b-book broker letting you continue is slim.

FYI you can attempt any type of strategy at GP, we don't block anything. You just won't be able to arb as it's a top grade a-book feed or ECN or DMA or whatever catch phrase people are using these days.

Cheers
Jeremy
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Latency Arbitrage, is this the way to go?

Postby dokopy » Thu Dec 31, 2015 10:41 am

Jemook » Thu Dec 31, 2015 7:19 am wrote:If you are going to give it a go you can use our feed on Empty4 as the source. We refresh ticks every 20ms so there are quite a lot of ticks coming through compared to most feeds. Yes, latency arbitrage does work on some b-book brokers and yes they probably will come up with an excuse as to why you can't keep profits. Can't hurt to try though, you can learn something about FX from any type of trading.

IMO it's as pointless as news/tick scalping which will only work on a b-book feed. If you can find somewhere that will let you do it then great but your chances of a b-book broker letting you continue is slim.

FYI you can attempt any type of strategy at GP, we don't block anything. You just won't be able to arb as it's a top grade a-book feed or ECN or DMA or whatever catch phrase people are using these days.

Cheers
Jeremy

GP is the only broker who blocked my demo account. Supposedly I tested the EA, which had too many orders.
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Latency Arbitrage, is this the way to go?

Postby Jemook » Thu Dec 31, 2015 11:24 am

dokopy » Thu Dec 31, 2015 9:41 pm wrote:
Jemook » Thu Dec 31, 2015 7:19 am wrote:If you are going to give it a go you can use our feed on Empty4 as the source. We refresh ticks every 20ms so there are quite a lot of ticks coming through compared to most feeds. Yes, latency arbitrage does work on some b-book brokers and yes they probably will come up with an excuse as to why you can't keep profits. Can't hurt to try though, you can learn something about FX from any type of trading.

IMO it's as pointless as news/tick scalping which will only work on a b-book feed. If you can find somewhere that will let you do it then great but your chances of a b-book broker letting you continue is slim.

FYI you can attempt any type of strategy at GP, we don't block anything. You just won't be able to arb as it's a top grade a-book feed or ECN or DMA or whatever catch phrase people are using these days.

Cheers
Jeremy

GP is the only broker who blocked my demo account. Supposedly I tested the EA, which had too many orders.


If you send more than 20,000 orders in a day to our server your EA needs fixing to not modify the order every tick.

No Empty4 broker will allow this as too many clients doing the same will slow the server down.

Regards
Jeremy
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Latency Arbitrage, is this the way to go?

Postby patrick93 » Thu Dec 31, 2015 2:30 pm

Thanks Steve for the attention!

The main thing why arbitrage works IS why Empty4 is so slow. CFD "brokers" have to provide their own price and thats why their prices are lagging. Some CFD "brokers" even allow arbitrage or they do not forbid it.
If you have a FIX API feed from the big boys like I described in my first post, you are always a few milliseconds ahead.
Also thank you Jeremy for your offer, but as I told, Empty4 is too slow for using it as a main data feed. GP is very fast indeed, but the platform kills the advantage and it won't be profitable.
I wouldn't consider arbitrage as trading, I mean technically it is, but it hardly needs any trading skills.

I think arbitrage would be Steve's favourite because all you do is exploit Empty4's slowliness and take the Bucket Shop's money :smile:

As there is now a bit of attention (and I thank you all for it), you might be interested in the following MFXB account:

http://www.myfxbook.com/members/www35

There is a link to a site which offers an EA for arbitrage, but
I DO NOT RECOMMEND TO BUY IT!!
It is just for your information arbitrage works even with more or less reknown brokers. Or is it possible to fake those MFXB statements, even if they are verified? I am just curious because if you look how that guy turned 60$ into 11.000 in two weeks it is a bit impressing.

Cheers,
Patrick
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Latency Arbitrage, is this the way to go?

Postby ghamm » Thu Dec 31, 2015 9:55 pm

HI,
New to this group..
Ive been writing software for 25 years.. and got involved with forex about 8 years ago.. Havenet done anything in 4 years..Id love to brag that Ive made money in forex, but after prob 10000 hours, I got my butt handed to me..

Anyway, Ive written prob 30 EA's, Written Arbitrage servers, scalpers, Hedge routines, Backtesters from scratch..

Arbitrage is amazing on paper.. However in real life you have some real issues..

1. Hard to determine consistent Latency.. may work one minute, and feed can shift minutes later.
2. Brokers hate you.. The best way to do this is to trade an ECN broker against a bucket shop.. the bucket shop will shut you down in no time flat.
3. Demo? Makes money all day. Now, throw real money on it, and see if you get good fills without slip.. Get slipped 1-2 pips? Game over..

So, its fun to play with, but not very realistic in real life..

G
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Latency Arbitrage, is this the way to go?

Postby 4xBones » Mon Jan 04, 2016 2:47 am

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