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Triangle of currencies – Synthetic Basket Trader

Triangle of currencies – Synthetic Basket Trader

What is a currency triangle?

Each currency pair is the ratio of one currency to another. For example, EURUSD is a EUR/USD. At the same time, to make a triangle for arbitration is to express one currency pair through two others so that as a result of multiplying these two other currencies, the same currency pair is obtained.

Note: we are not talking about the actual value of the exchange rates of currency pairs, but about their symbolic expression and correspondence.

To express this in a simple way consider the most common triangle:

EUR/USD = GBP/USD * EUR/GBP

Everyone remembers the arithmetic course (actions with fractions) from the school course? We have on the right side of the equation the product of two fractions, where the numerator of the first fraction (GBPUSD) is equal to the denominator of the second fraction, i.e. it is reduced by multiplication.
Thus, as a result, we have the identity:

EUR/USD = EUR/USD.

So, in order to get uniformity in all further actions, i.e. to bring the triangular arbitration method to a simple algorithm, all triangles need to be made in a way similar to the example considered:

EUR/USD = GBP/USD * EUR/GBP

To get a formula for general application, we denote:

EUR → A
USD → B
GBP → C

As a result, we get:

A/B = (C/B) * (A/C) (1)

That’s exactly what you need to bring any triangle to this form, or rather make it out of possible combinations of currency pairs. At the same time, the sequence of multipliers on the right side of the equation is rigid, i.e. it is impossible to swap multipliers.

A triangle formed in this way will always mean that the left side of the equation will always take a position in one direction, and two positions from the right side of the equation in the other direction, i.e. either: Buy-Sell-Sell or Sell-Buy-Buy.
Below is a list of all (or almost all) possible triangles for the currency pairs available for trading at most brokers (unfortunately, the table is repeated, i.e. there are similar triangles, only the pairs are changed in places).

If you are not a mathematician, then do not try to understand these arithmetic formulas and all this theory! This is absolutely not necessary!

Let’s get down to practice!

For example, here is a list of currency triangles that can be made up of assets that are in your MetaTrader 5 platform using the Synthetic Basket Trader software package:

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Of course, to create currency triangles, you need to correctly specify their trading direction in the settings of the Synthetic Basket Trader indicator.

For example:

  • EURUSD – buy
  • GBPUSD – sell
  • EURGBP – sell

In this case, you will get a synthetic equity of the triangle of currencies (triangular index), which looks like this:

That is, almost perfect horizontal equity, using which you can trade on a channel strategy and get a significant profit. Also, before starting to create a triangular portfolio, we recommend that you read the information on the page that describes all the pros and cons of trading on the triangular arbitrage strategy.

Several ready-made triangles

Don’t bother, we’ve already created several currency triangles for you. You can apply these automatic settings to the Synthetic Basket Trader indicator and start trading using the Triangular Arbitrage system!

After purchasing the Synthetic Basket Trader complex, you will receive ready-made sets of triangular portfolios.

Triangular baskets have a number of features, but they can be applied to trading strategies, links to which you will find below. As a rule, triangular baskets are more suitable for channel trading strategies.

Strategies for trading

We have developed strategies with which you can trade baskets of orders using the Synthetic Basket Trader indicator and the Equity Trader utility

Channel strategy

Trading is conducted on portfolios that are in a state of long-term horizontal movement. Buying and selling of the baskets is performed in the direction from the channel towards the center of the channel, and also in the direction from the center of the channel towards its outer borders.

Trend Strategy

Trading is conducted on trending portfolios that are in a state of long-term growth or decline. Buying and selling the basket is carried out in the direction of the trend movement.

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  • Technical support
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Economy package
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  • Indicator - iStock Correlation
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  • Technical support
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*Unlimited number of accounts with the username – the product will work on any number of accounts that are opened personally by the buyer (the product is linked to the buyer’s name).

**One trading account – the product will work only on 1 trading account, the number of which the buyer informs us to obtain a license to use the product (the product is linked to the account number).

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