I want to know practice lot size for arbitrage in forex.

In theory if I want to triangulate EUR , USD , GBP

Let say here are their relationship.

EURUSD GBPUSD EURGBP

EURUSD=GBPUSD*EURGBP,

GBPUSD=EURUSD/EURGBP,

EURGBP=EURUSD/GBPUSD.

EURUSD Ask price is 1.17058

GBPUSD Ask price is 1.27390

EURGBP Ask price is 0.92345

Implied price calculation is as follow

EURUSD/GBPUSD = 1.17058/1.27390 = 0.91890 (implied value we get)

EURGBP = CURRENT MARKET PRICE is 0.92345 > 0.91890

So we can get profit if sell at higher price

BUY EURUSD

SELL EURGBP

SELL GBPUSD

I want to know is how much lot need to buy and sell to get profit in forex market.

How calculate profitable lot size for each pair.

At noon , when implied price less than current EURGBP price,

I traded as

1.5 Lot BUY EURUSD is + 171usd

1.5 LOT SELL EURGBP is -458 usd

1 LOT SELL GBPUSD is +137 usd

total is - 140 usd

So my lot size is wrong?

Arbitrage trade is simutaneously trade to get profit within short time.

How you trade arbitrage in market?

A triangular arbitrage strategy exploits inefficiencies between three related currency pairs, placing offsetting transactions which cancel each other for a net profit.

A deal involves three trades, exchanging the initial currency for a second, the second currency for a third, and the third currency for the initial.
During the second trade, the arbitrageur locks in a zero-risk profit from the discrepancy that exists when the market cross exchange rate is not aligned with the implicit cross exchange rate.

A profitable deal is only possible when a market inneficiency arises and execution times are small.

• Theoretically, is a zero-risk strategy
• It is NFA/FIFO compliant

Currency pairs you can trade with:

• EURUSD, EURGBP and GBPUSD
• EURUSD, EURAUD and AUDUSD
• EURUSD, EURNZD and NZDUSD
• EURCHF, EURUSD and USDCHF
• EURCAD, EURUSD and USDCAD

Points:

1. The strategy is neutral to gaps, swings and stop-hunting
2. Trade at least with 0.50 lots: this allows to hedge deals with a 98% accuracy.
3. If you trade with less than 0.50 lots, the amount of trades closed at a loss will increase.

0.5 lot for all pair?
0.5 lot buy
0.5 lot sell
0.5 lot sell
?

kyawswarlin wrote: Fri Nov 20, 2020 4:18 am 0.5 lot for all pair?
0.5 lot buy
0.5 lot sell
0.5 lot sell
?

like this picture attached

Check this item too

EURUSD 1lot
EURGBP 0.8lot
GBPUSD 1.4lot

Correct answer