Triangular arbitrage is one of those strategies well exploited by the high frequency traders but the question is: do this strategies still work in nowadays markets ? To answer this question i had to leave the meta trader platform and the mql brokers to go with something more serious and advanced, an ECN, Dukascopy and their JForex platform was choosed for this experiment.
Jforex is a trading platform developed by Dukascopy on where the trader can make automatic trading scripts using the java programming language. Between the benefits of this ECN broker and its platform we can highlight:
- Fast execution.
- Tons of market history for all currencies.
- Possibility to test multi currency strategies against historical data, this wasn’t possible at mql.
A problem we can find with Dukascopy is the high commissions they charge per transaction, this is the price you have to pay for being trading with an ECN.
For illustration purposes only, the commissions were set to be as lower as possible just to know how good or bad the strategy is without the commissions. When i run the strategy in the last 6 months of data with an initial deposit of 100 k here is the report i got:
The pairs involved are the EURCAD, the EURUSD and the USDCAD as described by Irene Aldridge(2010).
The strategy made 60 % of profits, there were 137 exploited triangular arbitrage opportunities in the period.
Now, the same period with defaults commissions:
Big part of the profit is gone by the commissions when using the real ones.
The discussion is open, comments are more than welcome.