Latency Arbitrage 3.6
Metatrader 专家 (MT4)
Latency arbitrage is a high-frequency trading strategy that allows traders to make instant profits by acting fast on opportunities presented by pricing inefficiencies between two brokers: it entails trading against the slowest broker knowing the future price in advance -less than one second-.
- Easy to set up and supervise
- No indicators or hard analysis needed
- Arbitrage trading is time-frame independent
- Under ideal trading conditions, arbitrage is a zero-risk strategy
- Arbitrage is a high-volume strategy
It implements lots of amazing features:
- It implements two trading modes: Classic or Trailing Stop
- The EA can trade 32 simultaneous pairs or symbols
- The EA implements a customizable trading threshold
- The EA adapts to slippage and commissions
- The EA places safety SL and TP orders
- The trading activity is NFA-FIFO Compliant
So, what is latency arbitrage?
Latency arbitrage is a low-risk trading strategy that allows traders to make a profit with no open currency exposure. It involves acting fast on opportunities presented by pricing inefficiencies between different Metatader brokers. These inefficiencies can be caused by liquidity providers or network issues on the broker's side. When there is a price difference between brokers big enough to cover both spreads and then some, opposite trades are opened until both price quotes match again.
Latency Arbitrage consists on connecting several Metatrader platforms using a single Expert Advisor, and trading price inefficiencies between them, without the need of placing an opposite trade on other broker. This can be done because Metatrader brokers do not deliver quotes at exactly the same time, and it is common to find differences of 1-2 pips and 1-5 seconds between them. Thus, by getting quotes from a mixed group of brokers, the expert advisor can trade against the slowest one knowing the future short-term price in advance.
Latency Arbitrage needs a good internet connection and low spread brokers.
Example of Latency Arbitrage
The basic usage of the expert advisor is trading two different brokers against each other. The EA would take advantage of network or pricing inefficiencies between two brokers, sending short-lived orders and capturing 1-2 pips per trade. The expert advisor shares the last price quote and timestamp between all platforms, and attacks the slowest broker by knowing in advance the next price quotes to be received. In the example below, the EA is acting as master and slave in both platforms.
The Latency Arbitrage EA only trades when the price difference is likely to cover spread, commissions and slippage.
Finding suitable brokers for latency arbitrage
Finding suitable metatader brokers to trade using a latency arbitrage strategy is not an easy task, because it is based on trial and error. The performance of a latency arbitrage strategy is conditioned by your network distance to the broker server, which depends on your geographical location, and the quality of the liquidity provider the broker uses. Therefore results will be different for every user and location!
Your goal is to find a suitable fast and slow broker combination, and trade against the former using price quotes from the first one. Top-liquidity brokers are very good as a fast broker but very bad to trade against. On the other hand, small market-making brokers with low liquidity are perfect to trade against.
The following are great liquidity providers.
Fast Start Instructions
To start trading in no time, follow the short instructions below!
- Create a demo account with Tickmill, Axitrader or FXCM (Fast Broker)
- Find a low-liquidity-market-maker-bucketshop-broker and create a demo/real account. (Slow Broker)
- Install the PZ Latency Arbitrage EA on both platforms and enable DLL Calls.
- Open the EUR/USD chart and load the EA in both platforms.
- On Broker A, select Fast_Broker / EURUSD in EA inputs
- On Broker b, select Slow_Broker / EURUSD in EA inputs>
- The Slow Broker will start taking EUR/USD trades based on price quotes from the Fast Broker. Pay attention to the slippage the trades are suffering in the Expert Tab of the Terminal (To open the Terminal, click VIEW -> Terminal -> Experts). If trades are constantly losers, one of these two things can be happening:
- The slippage can be a little high. You should increase the Trading Threshold parameter and try again. Or...
- The slippage is definitely too high! If slippage is over 2-3 pips for EURUSD, you should stop trading and find another broker.
- Once you have found a suitable broker to trade against, you can start adding symbols to the EA.
- Happy trading!
Take a look at an example below:
Necessary actions during trading
The EA trades price discrepancies between two brokers and needs the slippage to be constantly below the price difference which triggers the trade. When the slippage is above the price trigger, the Ea will raise an alert indicating to raise the price trigger value in the inputs. You must never allow the slippage to be above the price trigger or the EA will constantly lose money.
- Node Configuration
- This block instructs the EA its node behavior. Set "Fast Broker" for the first broker and "Slow Broker" for the second broker. Also make sure to select the symbol of the chart from the inputs.
- Trading Settings
- Choose a trading mode and the price trigger to place trades. The price trigger is the minimum price difference between the two brokers to place a trade. It must be higher than the slippage your trades are suffering. You can also set an expiration time for the trades, which recommended value is 2 minutes.
Choosing a trading mode can be tricky. Select the "Classic" mode if your broker allows trades lasting only a few seconds. If not, select the "Trailing_Stop" mode which resulting average duration of trades is around 2-3 minutes. Using a trailing-stop obfuscates the fact that you are using an arbitrage strategy to the broker.
- Other Settings
- The EA can auto-calculate lotsizes from your desired risk, or you can enter the lotsize for the trades manually. Lastly, the trader can enter a manual pip-value, slippage for the orders, magic number and custom comment for trades.
- Colors and Sizes
- Customize label colors and sizes.
- EA Settings
- Optionally, you can set your own Magic Number for the trades and a custom comment for the trades.
- What does a license include?
- One license allows usage from three computers or VPS.
- Which broker should I trade with?
- What account balance should I start with?
- A very small account balance is recommended: 100$
- Does the Expert Advisor use DLLs?
- Yes, it does, because it needs to communicate two metatader plaforms.
- Is arbitrage allowed in all brokers?
- No, it is not. Read carefully the terms and conditions of your broker before trading.
- Can the broker close my account if I trade using this strategy?
- If the broker has arbitrage forbidden on its terms and conditions, yes, it can.
- Can I backtest this Expert Advisor?
- No, you can't. The EA needs data from at least two different brokers to trade, thus backtesting is impossible.
- Can you recommend brokers to trade with?
- No, I can't. Finding suitable brokers shall be done by trial and error, because performance depends on your network distance to their respective servers. Hence all users will have different suitable brokers depending on their geographical location.
- Do I need a VPS?
- No, you don't. You can trade this expert advisor from your home computer! Since the trades last barely one or two seconds, you can trade it only for one or two hours a day and still make good profits. In fact, if you hire a VPS and pound your broker all day long, it might put your account under scrutiny.
- How many accounts can I trade with one license?
- Unlimited accounts. A license allows usage from three computers or VPS.
- Does slippage affect negatively?
- Yes, it does. The EA can make profits if slippage is less that 1 or 2 pips. The slippage for all orders can be found in the expert tab of the terminal (VIEW
- Can the broker sabotage my trading activity?
- Yes, it can. Some brokers have anti
- Why is the EA placing stop
- profit orders? Can I change them?
- The EA places SL and TP orders for safety, but are irrelevant to the strategy.