Arbitrage trading: Pros and Cons

The popularity of trade in the financial market increases every year. There are new players, brokerage companies, hedge funds, as well as new “stars” in this segment. Certainly, every fix api trader should be able to resist the whole market. Therefore, there are many tools in his help, but the most effective one is the availability of a trading strategy that allows you to select trading signals and predict the future movement of financial assets.

The process automation of conducting the main activity has reached the sphere of financial markets, thanks to which there are trading robots that turn the strategies of traders into algorithmic systems. Moreover, automation allows us to use new approaches for the analysis of financial assets and the state of the market as a whole. Such strategies can be added to the fix api arbitrage trading.

Arbitrage trade consists in opening positions on the basis of exchange rate discrepancies for the same financial asset, but on different stock exchanges. Yes, this is not a new approach to trading, but if we consider fix api forex, previously this technique could not be used due to several factors. First, the forex market is inherently a single platform, and secondly it is the most volatile market and it is very difficult to arbitrate in a “manual” mode. However, here fix api forex brokerage companies come to help the trader setting mark-ups on currency pairs and giving an opportunity to trade on exchange rate differences with minimal risks.

Our software works exactly based on this principle – it analyzes the same currency pair at different brokerage platforms and makes deals on condition of maximum divergence of quotations. Most developers make algorithms only for the terminal and one broker. We have created a separate software that allows you to connect to two different trading accounts in different brokerage companies – .

However, like each trading algorithm, arbitration also has key factors that fall on the “pros” and “cons” scales for its use. We will tell you about all the obvious factors that indicate that the arbitration algorithm must necessarily be used in the trading, as well as those that restrain it.

Key “pros” for using this algorithm:

  1. High profitability rates. The arbitrage algorithm is able to open a trading position only after reaching the maximum exchange rate differences, which allows you to fix a high profit potential.
  2. Minimum risk indicators (or completely risk-free). By opening such positions, the risks of trade are reduced to zero, because the main rule is that buying is cheaper and selling is more expensive. Due to the fact that the operations are conducted on the same asset, it guarantees either profit receipt or at least closing to „zero“.
  3. A wide list of fix api forex brokerage companies on which you can make arbitration algorithm. Each broker has his own asset prices, which provides you an opportunity to earn money.

Key “cons” for using this algorithm:

  1. The complexity of implementation in the “manual” mode. An ordinary person is not able to follow the movement of quotes at various terminals and still to have time to conclude deals, as we wrote above.
  2. Prohibitions of certain brokerage companies. Due to the fact that the algorithm has a stable profitability, some brokerage companies forbid it, because they play against their customers. So, the customer’s profit is a direct loss for them. To avoid this, some companies even forbid fix api arbitrage trading by writing this clause in the contract.
  3. The complexity of implementation. Most standard robots are implemented for one terminal, while this method is not suitable for arbitrage trading. You need a separate software that will be able to trade on different accounts.

As you can see, there are some difficulties in using the arbitration algorithm. But understanding this, we created software that solves this problem. Our forex lock arbitrage robot is able to trade on different accounts, and with the help of the manual trading module can mask transactions when putting them on the brokerage company’s server. This in a complex solves the above three “cons” of using the arbitration algorithm.

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