The success of the latency arbitrage trading is largely dependent on the correct software setup. I would like to share some of my observations.
Lot calculation: Fixed Value / Balance percentage – I recommend to try first several trades with fixed lot size 0.01 (Fixed Value, lot size =0.01), and then you can switch to Balance percentage and set Percent =5 or 6
Stop Loss and Take Profit
For our arbitrage software we use standard SL, Hidden SL and trailing stop loss. Unlike a normal stop order, the trailing stop will follow the position, as it becomes increasingly profitable. Trailing stop you need to set 2 parameters: "distance to market" and "trailing step":
Distance to market: how far from the market price should the stop be placed. In our case we place SL on S/L distance and then when market move on “Pips to min profit” value (or on “Min Profit value” if “Pips to min profit” =0) , we start to readjust SL value with “Trailing Step”. Trailing Step: by how much should the market move before the stop order re-adjusts.
Hidden SL and TP
If you use hidden SL or (and) TP, you need to determine visible SL and (or) TP factor.
In this case value of Hidden SL = S/L , and value of visible SL = Visible SL factor x S/L
value of Hidden TP = T/P , and value of visible TP = Visible TP factor x T/P
If you set S/L =2
Visible SL factor = 3
Your Hidden SL = 2 and Your visible SL = 2x3=6
Warning: you need to understand that hidden stop loss may slip by broker. We recommend to use standard SL and TP.
First value of the stop loss depends on the spread for the particular currency. If spread for slow broker is low, you can use “short” stop loss. For example, if spread for eurusd 0.2 – 0.5, you can use SL = 1-2
Spread for gbpusd 0.6 -0.9, you can use SL = 2-3 etc.
If you use trailing stop, we recommend to use large TP value, for example 30
We recommend to use 1 pips. Software will automatically take into account spread and commissions.
Pips for min profit
This value will help to move SL into breakeven level only, if profit for trade will be equal or higher than “pips for min profit” value. You can use it for trading on news releases to avoid quick response to stop loss on the disorderly market fluctuations.
We recommend to use 1-3 pips
We recommend to use 1.
Order life time in sec
We recommend to use default value
This parameter is very important if you trade on FIX API account with FOK or IOC orders. In this case you can control slippage.
For example if you send BUY order by price 1.34560 and your slippage value =5 order can be executed by price 1.34560 + 5 pips = 1,34565 or by the better price.
Difference to open
WE recommend to use 2 -3 for majors, 7-8 for gold, 3-5 for DE30
Max Spread Fast and Max Spread Slow
These filters should be adjusted to avoid any losses when a broker increases spread. For example, on news. This values should be lower then S/L value. For example if your S/L = 2, you need to use Max Spread Fast and Max Spread Slow = 1-1.5
Bid offset and Ask offset
You need to adjust offset if fast quotes and slow quotes has constant shift. For example different between GER30 on fast feeder and on slow broker 3 pips almost all time.
We made tests on LIVE accounts with recommended settings.
Live Account 1
Live Account 2