Foreign Exchange Triangular Arbitrage Example using Live Data

In this video I demonstrate a common topic in international finance and foreign exchange trading called Triangular Arbitrage. Instead of static data, we make use of live data from ThomsonReuters. The resulting model provides an intuitive and exciting way to learn about foreign exchange market.
Nothing in this video should be considered investment advice. The purpose of this video is not to demonstrate a trading strategy.
Please note that there is a very big difference between an institutional trader working with a dealer network and a retail trader working through a broker. No FX broker will allow this type of arbitrage at a profit and will set their quotes (for their participants) such that it will not be profitable (even before commissions are taken into account).
Institutions can, and do, enact this type of arbitrage as they have direct access to FX dealer markets. Discussions of limit orders, slippage, etc. are not germane in this context.

[@legomainia]

One of the best triangular arbitrage videos I have seen to date. Thanks for making it simple!

[@WalterLECORDIER0]

Really interesting, thank you Richard

[@AcvSdf-es5ov]

If you take the three price at the same time you will find that the profit is 0. But if you use your technique and inverse it you will make some profit for a while.

[@juergenx298]

Very good solution! I want to realize that in MT5 - first in Excel.

[@themixchannel1816]

Thanks for the Video !!!!

[@mads7401]

Very interesting, thanks :)

[@PepeTostado]

Do they have to be in order, I mean... First do the transaction for the first pair, then the second and lastly the third or what does an algo so

[@johnatanfx]

Cool 🙌

[@BourgeoisInTown]

Thank you for your idea. But it will be hard to implement.Because if you use Limit Order, one of these orders could get hanged, you will probably lose money. If you use Market Order, the price will be different by the time you send order to your server.

[@professorholowczak]

You are assuming these transactions are from a retail perspective. These are actually dealer quotes from the Reuters Dealing 3000 network (the largest FX dealer liquidity pool in the world) which are firm quotes up to a depth of $5 million. Of course as a retail trader you incur commissions and other market impact issues.

[@kriptoaforizma6384]

Hi thank you for totarial. I have one question i need platform I mean online currency shop ı cant read Thank you

[@nhanthanh2085]

Cảm ơn video

[@harrisondelfino3405]

I had used MarketXLS and it's great.

[@MathSpace101]

Hi Mr Delfino, were you able to implement this as a retail trader?

[@khalidwithyoutub1000]

Fxcm my trading currency is USD. Should I trade all three currency pairs together when the opportunity arises?. Because in fxcm the trading currency always in doller. Could you please assist me on this?

[@ia_para_Negocios]

thanks nice video....... but i think you forgot to tell about the broker comission, because you say risk free for trading a volume of $5,000,000. in this case if the broker own $5 / standard lot this volume will be in each round $250 x 3 = $750 . Also the order have to be filled with Limit order with FOK instruction and we have to have luck to all this three order to be filled with no slippage, or if we will accept for example 1 pip slippage maximun for each execution this three round order will also have an extra cost of $50 x 3 = 250..... so I think this example of your video using limit order and set the max deviation to 1 pip and pay the $5 comission per standard lot the total cost will be $1000 . so you show several times the profit less them $1000 but it will not be profitable...... sorry if I am wrong.... but please explain to me how to avoid this cacules I did....

[@rdholowczak]

You are assuming these transactions are from a retail perspective. These are actually dealer quotes from the Reuters Dealing 3000 network (the largest FX dealer liquidity pool in the world) which are firm quotes up to a depth of $5 million. Of course as a retail trader you incur commissions and other market impact issues.

[@dyerei7586]

Is there any platform to buy and sell this currency digitally?

[@zenphone-ri9sz]

Teria como disponibilizar esta planilha.

[@iwyz80]

Hello, I have been trying to implement something like this on my excel but I cannot seem to get the live feed. Did you do anything special to the L row in the spreadsheet? Please I need help in getting this to work. Any assistance will be most appreciated. Nice video by the way

[@rdholowczak]

What is your data source? In this example I am using Thomson Reuters Eikon. You could do something similar with Bloomberg or with broker software such as Interactive Brokers.

[@heihalla3773]

i didnt understand the USD/eur part where you divided by 1. how am i supposed to end with euros if the platform only gives me EUR/USD?

[@saidalkharusi7824]

For EUR/USD quotes, you can exchange USD for EUR using the ask rate.

[@annon123]

So how can we take advantage of these opportunities if they only last a couple seconds? We cant do the trade in that time...

[@rdholowczak]

See above comments - certainly sophisticated hedge funds and large FX dealers (banks) can take advantage of these but not retail traders.

[@TWClubTrader]

Envia a planilha? send planilha? pls

[@hunter4243]

You wouldn’t be doing this manually? Correct? You would have to automate this system wouldn’t you? Can these arbitrage opportunities be spotted and acted on fast enough by humans to be efficient?

[@B0redneko]

This makes it look so easy to make money but youd have 2 have some massive $ though to get some nice bucks

[@thiagoribeiro4733]

It's not riskless 'cause for a great amount of money you always rely on liquidity, also you depend on the latency between you and their server and moments like that they usually get lots of incoming network messages and as consequence those who are slower or further will get to the end of the line and might get a rate different from the one you were waiting for. But a nice idea anyway.

[@rdholowczak]

You are assuming these transactions are from a retail perspective. These are actually dealer quotes from the Reuters Dealing 3000 network (the largest FX dealer liquidity pool in the world) which are firm quotes up to a depth of $5 million. Of course as a retail trader you incur commissions and other market impact issues.

[@JaimeVelazquezCMEEF]

Hi, Richard! At the beginning of your example you start with US$5,000,000 and then sell them for Euros @ US$1.0240/Eur, but instead of DIVIDING, you multiplied!! You should have gotten Eur 4,882,812.5 as a starting number, not US$5,120,000. Either you have an arithmetic error or you are quoting the wrong way (US$/EUR instead of EUR/US$)... Best!

[@professorholowczak]

Jaime Velazquez Euro quote is always "inverted" on Reuters and so we take the inverse and then multiply (again, I was trying to follow the textbook example as closely as possible).

[@JaimeVelazquezCMEEF]

It´s a good example, Richard. Thank you for sharing!!

[@herikaniugu]

@@professorholowczak do you use ASK only when price is inverted?

[@Ama_Teur]

in your video only Bid and only converted to Exel and risk very high

[@forexplanet5048]

Hello dear Richard, i did as you said short eurusd long eurgbp long eurgbp each trade 0.10 lot. at the same time17.03.2015 14:27:09 at this point there is a lost of 122 pips. That should not happend. The total loss should be 6.9 pips becouse of the spread. Do you know why it happend..? Thank you!

[@DDOS01111000]

use very low spread fiex for example eurusd= 3 spread fixed

[@183687]

Its reality? how work this

[@MathSpace101]

I imagine that slippage would be a big problem.

[@professorholowczak]

You are assuming these transactions are from a retail perspective. These are actually dealer quotes from the Reuters Dealing 3000 network (the largest FX dealer liquidity pool in the world) which are firm quotes up to a depth of $5 million. Of course as a retail trader you incur commissions and other market impact issues.

[@Ama_Teur]

it will not work - because of Spread

[@DDOS01111000]

and if you have fix spread very low?

[@schrodingerscat3912]

@@DDOS01111000 yes. the real issue is that your broker will not allow you to arb on their platform. America has even less brokers to work with

[@schrodingerscat3912]

there are arbs in the market but it wouldn't work because no broker will allow you to trade with them if they see that you are making consistent profits with 100% accuracy

[@DDOS01111000]

@@schrodingerscat3912 and how we can get profit,.... with arb

[@schrodingerscat3912]

@@DDOS01111000 arbitrage is mathematically possible in many markets still. A retail trader can profit if the broker/exchange doesn't interfere with or stop the trading. Cryptocurrency is one way we can profit but you cannot trade large orders because the order books are usually is thin. en.wikipedia.org/wiki/Arbitrage