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By Capella at http://worldwide-invest.org/
Assign 3 small whole numbers to 3 currencies called A, B and C, so that A = B * C., like this…
Currency 1 = EUR = A = 6
Currency 2 = USD = B = 3
Currency 3 = JPY = C = 2
For instance: EUR/USD + EUR/JPY + USD/JPY (Buy + Sell + Buy, or Sell + Buy + Sell)
EUR/USD + EUR/GBP + GBP/USD (Buy + Sell + Sell, or Sell + Buy + Buy)
EUR/USD + EUR/JPY + USD/JPY (Sell + Buy + Sell, or Buy + Sell + Buy)
By making the calculation according to the formula for a triangulation we end up with a number that is near the value of
It shows how much imbalance there is in the hedge of the 3 currencies in the 3 pairs. The idea of trading is to open 3 suc
FPI for the above = 1.00002583 <= See K79 and below
FPI for the below = 0.99996750 <= See K79 and below
The colored currencies (yellow for EUR, green for USD and orange for JPY) are here hedged, except JPY which is almost h
Diff for the above = 139041 - 139039.5188 =
Diff for the below = 139055 - 139050.48136 =
Note: In G35 (and G49) the lotsize is not 1 but the price for the base currency (first currency in the pair). Here at line 35 i
So the lotsize for the 3rd pair (C / A) in the triangulation is the price for the pair A / B (if the base currency A is found in t
We have 8 Majors:
USD, EUR, JPY, GBP, CHF, CAD, AUD, NZD
number that is near the value of 1, but never exactly 1. We call this value FPI (Fractional Product Inefficiency).
he idea of trading is to open 3 such positions when the FPI is as far awy from 1 as possible and to close it as far away as possible on the
ged, except JPY which is almost hedged due to rounding error caused by too few decimals in the lot size:
1.4812 JPY
4.51864 JPY
ency in the pair). Here at line 35 it is USD. Now check the price for this as quote currency (2nd currency in a par) against another curren
the base currency A is found in the first pair (A / B), or using the price for the 2nd pair B / C (if the base currency is found in the 2nd pa
Y, GBPCHF, GBPNZD
PY, NZDCAD, CADCHF
SD, USDJPY, NZDUSD
AD, AUDCHF, AUDNZD
D, EURAUD, EURNZD
, NZDCHF, CADCHF
DJPY, NZDJPY
ZD, NZDCHF, NZDCAD
There are two possible order sequences: B/B/S (S/B/B) or B/S/S (S/B/B)
he darker colors are inverted pairs. Different colors, see line 23 and 24 above!
B/C C/A Order 1 Formula Order 2
USD/JPY EUR/JPY B/B/S AB * BC * (1/CA) S/S/B
GBP/USD EUR/GBP B/S/S AB * (1/BC) * (1/CA) S/B/B
USD/CHF EUR/CHF B/B/S AB * BC * (1/CA) S/S/B
USD/CAD EUR/CAD B/B/S AB * BC * (1/CA) S/S/B
AUD/USD EUR/AUD B/S/S AB * (1/BC) * (1/CA) S/B/B
NZD/USD EUR/NZD B/S/S AB * (1/BC) * (1/CA) S/B/B
GBP/JPY GBP/USD B/B/S AB * (1 / BC) * CA S/B/B
CHF/JPY USD/CHF B/S/S AB * (1/BC) * (1/CA) S/B/B
CAD/JPY USD/CAD B/S/S AB * (1/BC) * (1/CA) S/B/B
AUD/JPY AUD/USD B/B/S AB * (1 / BC) * CA S/S/B
NZD/JPY USD/NZD B/B/S AB * (1/BC) * (1/CA) S/S/B
USD/CHF GBP/CHF B/B/S AB * BC * (1/CA) S/S/B
USD/CAD GBP/CAD B/B/S AB * BC * (1/CA) S/S/B
AUD/USD GBP/AUD B/S/S AB * (1/BC) * (1/CA) S/B/B
NZD/USD GBP/NZD B/S/S AB * (1/BC) * (1/CA) S/B/B
USD/CAD CAD/CHF B/S/S AB * BC * CA S/B/B
AUD/USD AUD/CHF B/B/S AB * BC * CA S/S/B
NZD/USD NZD/CHF B/B/S AB * BC * CA S/S/B
AUD/USD AUDCAD B/B/S AB * BC * CA S/S/B
NZD/USD NZDCAD B/B/S AB * BC * CA S/S/B
NZD/USD AUD/NZD B/S/S AB * BC * CA S/B/S
Curr 2 Calculation
USD (1,37032 x 100000 / 1)
JPY (139,567 x 100000 / 100)
JPY (101,465 x 137032 / 100)
Product Inefficiency).
and to close it as far away as possible on the other side of 1.
Curr 2 Calculation
USD (1,37032 x 100000 / 1)
JPY (139,055 x 100000 / 100)
JPY (101,473 x 137032 / 100)
2nd currency in a par) against another currency in the triangulation (line 33 - F33).
C (if the base currency is found in the 2nd pair).