for example. Instead of using say 5 mins and 30 mins as your basis to trade from, use 15 mins and 2hours or 60 mins and daily etc. Just examples - nothing more... Best Natalie
So you treat your risk management (size etc) and capital management and assignment accordingly, but remember the targets are much bigger too. So all the same principles of money management apply - it's just a different market with different parameters. Best Natalie
I am not an expert in FX, but from many discussion with FX traders I think that you cannot arbing this case as you mentionned, the case is not so simple than the stock market since the most FX firms are not true interbank quote, these quote are internal for most of them are even if their quotes follow the spot or something as that, you cannot transfert the underlying product (currency) without losing because you have to go back with the same firm and you pay their spread. This is not the case with stock market where you can always truly delivered the underlying product. If you want do arbing, take futures or option on FX, in this case you can truly play intermarket. BTW, on FX forums as http://www.moneytec.com/index.php Saxo bank seem to be a very good firm, more than the most FX firm, and have more professionnal setup than the most them. I have browse quicly their website and I have seen some features that are not available from the most FX brokers. As mentionned on moneytec forum, many people forget that FX firm and interbank market is not the samething, this can give some strange result sometimes if trade with the data that come from other source than your FX brokers.
When Arbing anything against anything else, you still need to close out both positions in order to actually take the profit, otherwise you simply have a paper position open. Where you have 2 instruments/companies or whatever that are seriously out of synch for essentially the same thing (and especially with the underlying), then sell one buy the other, wait for them to come back into line and then close both positions. But the quote from me has been answered out of the context in which it was written anyway... Best Natalie
Added - Not quite the same as buying and selling exactly the same thing in different markets for the price differential.
GirlPower, for to talk of arbing, the situation have to be zero risk as a differential on instruments (futures vs options vs stocks) or intermarket's differential (e.g. NYSE vs TSE for Nortel). In each case you have a mechanism for to freeze the differential and take your profit without risk (e.g. you convert the options and sell immediatly the stock share, or you buy NT on NYSE on an account and sell it immediatly on the TSE). You can also attempt to hedge or use other non-zero risk strategy as spread crossing on correlated stocks, but this is not arbing. For the case of FX, if you have some differences between 2 FX brokers, you cannot take advantage of the differential, because you have to close your position with the same broker whose pay himself in the spread with some extra PIPS and send this money to the second FX brokers with the same extras PIPS spread. Each time you pay the spread which can ruin you with this kind of strategy. If you exclude this solution interbrokers with exchange of money, the only other strategy that a differential with 2 brokers can be play in theory is to that one lag «always» on the second. At his moment you play the first using the quote of the second, but don't forget that many condition will have to meet: it will be surprising that the lag will be always in the same direction, also the spread have to be enought tight from your FX brokers for to play it. Also don't forget that the FX price is not the the true spot price, it come from inside their trades which attempt to follow the spot as an ECN will track the national bid/ask offer. Under this case, the mean and variance about their internal quote will fluctuate and not always in agreement with the true trend of the spot price, you can attempt to take advantage of that but this is not free risk as the arbing.
This recent turn of discussion to Arbing the price differential is getting interesting. It seems that there are 2 rules that are relevant to trying to Arb between two different fx firms. The first rule is that an open position at one fx firm is non-tranferrable to another fx firm. This is an impediment to arbing. The second rule is that we get charged a rollover fee if we don't settle a position within 2 business days. This implies that there is a delivery and settlement process for a position. Hypothetically Speaking, let's say I get a quote from Saxo: EUR/USD high 1.1382, low 1.1310 Refco: EURO/USD high 1.1386, low 1.1304 Is the following transaction allowed ? I go Long the EUR/USD @ 1.1382 at Saxo and go Short EUR/USD @ 1.1386 at Refco. Instead of closing the position or electing to roll it over at Saxo, I instruct them to deliver the Euros and wire the Euro to either a bank or directly to Refco. Unlike most of fx customers, I want to take delivery of the position. For the sake of simplicity, let use 1 mini lot as an example. I bought 10,000 EURO for $11,382 USD at Saxo. I instruct them to debit the $11,382 USD from the cash deposit in my account and wire the 10,000 EURO to Refco. At this point, I will settle my position at Refo. I will deliver 10,000 EURO to them and they will have to credit my account with $11,386. Giving me an Arb of $4. Obviously, $4 is not enough incentive to do this transaction. I would need to get a greedy fx firm whose spread is way too wide. Is the mechanics of this transaction valid or are there rules/roadblocks setup at fx firm preventing me from doing this type of transaction?