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I think you are right! Its a conceptual mistake on my part. I should have focused on the larger picture.
Thanks for pointing that out. Thats the benefit on sharing your thoughts on a forum. It shortens the learning cycle.
Yeah, it doesn't matter if this is a super-long term system. You're getting less than a simple carry trade, which is like randomly buying a currency, and hoping it goes up (while receiving interest).
I hope you didn't take my comments as harsh: I wanted to make sure you realized the mistake and didn't live trade this.
Yeah, it doesn't matter if this is a super-long term system. You're getting less than a simple carry trade, which is like randomly buying a currency, and hoping it goes up (while receiving interest).
I hope you didn't take my comments as harsh: I wanted to make sure you realized the mistake and didn't live trade this.
Hello,
What you had said made alot of sense . Its like a thunderbolt which has awakened me up from a dream! You had rightly pointed out the crux of this whole concept and saves me time and effort in making more mistakes in the future. Why would I get upset? In fact, I'm more than happy!
BTW, thanks for the PM in explaining what arbitrage really means. Not too along ago, I had come across this very good article, and I kind of remember it well: http://kreslik.com/forums/viewtopic....er=asc&start=0
Right now, when I read it again, its beginning to make more sense to me. I was thinking of making a sort of hedge configuration involving direct pairs and cross pairs. For example,
Sell EURUSD
Sell USDCHF
Buy EURCHF
The idea behind this concept is that the cross product between EURUSD and USDCHF is EURCHF. Consequently, the pip movement difference resulting from the first two currency pair directly governs the movement of the third pair. Hence, the inclusion of the crosspair can act as a "stabilizer" of some sort.
Hope its not another harebrained idea again! LOL...
That system is actually mathematically sound, and uses true arbitrage (buying currencies at one price, selling at another, at the exact same time). Some things to consider:
- You need extremely fast execution. Once you see the difference, you need to get in fast.
- You need very low spreads.
- You need to be making actual currency purchases, verses using a bucket-shop (which most "brokers" are).
Read that whole thread. I did a while back, and it was really interesting. They raise these issues plus more. Basically, it's very hard to do as a "normal" trader, but is not impossible. Also, if your broker modifies prices at all (most do due to lower very short-term volatility), this will not work.
What you had said made alot of sense . Its like a thunderbolt which has awakened me up from a dream! You had rightly pointed out the crux of this whole concept and saves me time and effort in making more mistakes in the future. Why would I get upset? In fact, I'm more than happy!
Right now, when I read it again, its beginning to make more sense to me. I was thinking of making a sort of hedge configuration involving direct pairs and cross pairs. For example,
Sell EURUSD
Sell USDCHF
Buy EURCHF
The idea behind this concept is that the cross product between EURUSD and USDCHF is EURCHF. Consequently, the pip movement difference resulting from the first two currency pair directly governs the movement of the third pair. Hence, the inclusion of the crosspair can act as a "stabilizer" of some sort.
Hope its not another harebrained idea again! LOL...
. Its like a thunderbolt which has awakened me up from a dream! You had rightly pointed out the crux of this whole concept and saves me time and effort in making more mistakes in the future. Why would I get upset? In fact, I'm more than happy!
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