Automated Currency and ETF Arbitrage Journal

Discussion in 'Automated Trading' started by robbob, Jul 23, 2012.

  1. j2ee

    j2ee

    Thanks for your sharing. I have read your blog and it is very interesting. So your program is automatically trading 24 hours a day now? As I asked before, are you trading Forex future? Why would you pick HK dollars? I am in HK so I wonder LOL.
     
    #11     Aug 15, 2012
  2. robbob

    robbob

    Ah ok I understand what you're asking. Yes the strategy is trading 24 hours a day, and its trading spot FX at IB, not futures (although I am working on a couple of strategies that will trade futures). The HKD/JPY rate exhibits some interesting price action, but I don't have historical data for the pair so I was able to backtest this strategy on it. So I'm trading it in a live account with minimal position sizes so I can see how it performs in actual trading.
     
    #12     Aug 15, 2012
  3. Interesting journal. Not the most popular of pairs and was wondering why specifically you have chosen the ones you are using?

    Good luck
     
    #13     Aug 15, 2012
  4. j2ee

    j2ee

    Cool. What is the main different between spot FX and future FX in IB? Spot FX can let you trade with smaller amount? I traded stock and future, but never tried FX.
     
    #14     Aug 15, 2012
  5. robbob

    robbob

    Thanks. The strategy is a short term mean reversion strategy which AUD/NZD and EUR/DKK backtested well on. I didn't have any historical data for HKD/JPY, but the spread at IB on that pair is 1/2 pip and it *looked* like it may exhibit price behavior that would be conductive to a mean reversion strategy as well.
     
    #15     Aug 15, 2012
  6. Gotcha. Spreads in FX mean reversion strategies can be system killers. U should look into a true ECN broker for such a strat. Unfortunately, IB is just like every other bucket shop which means that you are ALWAYS buying the offer and selling the bid.
     
    #16     Aug 15, 2012
  7. robbob

    robbob

    IdealPro at IB actually does operate as an ECN with banks acting as the liquidity providers. So you can place a bid and/or offer and see it show up in the IdeaPro order book and the order can get lifted potentially getting filled at a better price than the bid/ask. Their spreads on the majors are pretty competitive at 1/2 pip. And AUD/NZD average spread is around 3 pips, which is the best I've seen up to this point.
     
    #17     Aug 15, 2012
  8. robbob

    robbob

    With a spot transaction you are actually taking delivery of the currency, whereas a futures contract is for delivery at a later date.
    The futures contracts have fixed amounts, such as 125k for EUR, whereas with currencies IB will allow you to trade any amount above a certain minimum on their IdealPro exchange.
     
    #18     Aug 15, 2012
  9. Yeah that's not bad for a retail account. How much is the commission?
     
    #19     Aug 15, 2012
  10. robbob

    robbob

    Commission is 0.2 ticks, with discounts if you do A LOT of trading ($1B+ in volume). I've heard brokerages such as Dukascopy have better/cheaper commission structures, but I'm not sure they can beat IB on the spreads, so maybe it ends up being a wash.
     
    #20     Aug 15, 2012