Automated Arbitrage
Hi,
I am currently writing conditions and processes for automated equity arbitrage ADR/Local.
I would appreciate any advises and help from experienced traders who are willing to help me on that.
Currently when a predefined ADR/Local spread is hit, i execute buy sell order simultaneously on ADR and local side in packages of 100 shares until a certain budget limit is hit say 8000 USD per stock or the previous condition of the spread is no longer valid.
This is a really brief summary but it sums up the main idea. What else do i have to consider apart from the execution of the FX orders which will be created at a certain benchmark.
Have you actually tried this strategy? What markets are you trading on?
Although your pretty much trading risk free, I don't see you making very much either. This was big a few years ago when algos where being designed, but too many are in the game now. Opportunites only last split seconds and other algos will beat you too it and/or turn it around and run it both directions immediately thereafter to actually squeeze you out to take YOUR money..... Yep, there are algos designed to fake out other algos.
In my opinion, the only way you should proceed is if you have statistical evidence to support that price arbitrage still exists in the markets that you trade and that your algo will be fast enough to be profitable. Otherwise, the project is a time waster. Don't waste time on something that will lose money on piling up commissions (100 share lots adds up) after breaking even on 'risk-free' trades.
in this case we are in peru where there are still arbitrage possibilities and currently exactly this is done manually. I am having my doubts myself as i am quite new to the topic but have read a lot about this stuff. I figuered you need at least a quant department of 9 people to reap some profits from trading strategies.
one more thing, anyone has experience to connect FIX 4.4 and drop copy to Matlab?