Forex Trading Strategy for Beginners in 2022 Thursday December 23rd, 2021 – Posted in: Arbitrage Software, cryptoarbitrage software, Forex trading

In this article, we will tell in detail how to prepare for trading in the forex market in 2022 and build a forex trading plan based on which trading strategy is more appropriate to you. We will also tell you how 2022 will differ from 2021 in terms of the behavior market.

The situation in 2022 will be different from that to which investors have become accustomed in recent years warns Goldman Sachs in its forecast for the US stock market next year. The main change is the beginning of the US rate hike cycle. Morgan Stanley analysts have updated their expectations for 2022 and now predict that The Fed will hike rates twice: September and December. The previous forecast implied that the US Central Bank would not start raising rates until 2023. After two increases in 2022, Morgan Stanley expects three more increases in 2023: in March, June, and December.  The Fed has effectively-recognized that inflationary pressures will continue into next year. There is a period of high volatility. High volatility allows for high margins for arbitrage and trade on economic news.

Arbitrage trading vs News trading

News trade

Benefits

  • Toxicity of strategy lower than arbitrage
  • High profitability

Disadvantages

  • High Price News Feed
  • Requires strong trader engagement
  • Requires knowledge of economic indicators

Arbitrage Trading

Benefits

  • High profitability
  • No deep knowledge and understanding of trade required
  • Low risk
  • Insensitive to wound phases

Disadvantages

  • The frequent account changes needed due to toxic strategy

How to start arbitrage trading in 2022

If you have weighed all the pros and cons and decided that arbitrage trading suits you more, you need to prepare and test accounts for trading and select the arbitrage strategy that suits you the most. The main types of arbitrage strategies are:

  1. Latency Arbitrage

1.1 Lock arbitrage

1.2 LockCL arbitrage

1.3 LockCL2 arbitrage

1.4 LockCL3 arbitrage

1.5 BrightTrio arbitrage

  1. Hedge Arbitrage
  2. Statistical Arbitrage
  3. Triangular arbitrage
  4. Cryptocurrencies arbitrage

5.1 latency cryptocurrencies arbitrage

5.2 hedge cryptocurrencies arbitrage

How to choose the right arbitrage strategy?

At first glance, everything looks confusing and it is difficult to determine which arbitrage strategy is for you, but you can go by sifting off those strategies that you’re not gonna be okay with. If you are a US resident, you are severely limited in the choice of brokers and I would recommend choosing between LockCL3 (this strategy uses two accounts and one Of these, it does not participate in arbitrage, but only in hedging transactions) and Cryptocurrency arbitrage. If you have no problem opening accounts, I would recommend DAAS with a built-in BrightTrio strategy since I can mask arbitrage trading most efficiently and without losing profitability. The effectiveness of arbitrage masking when using BrightTrio results from multiple factors account:

  1. Orders shall be opened long before the occurrence of an arbitrage situation (as well as for Lock, LockCL, LockCL2, LockCL3).
  1. Minimum order duration for each trading instrument set by program settings (as well as for Lock, LockCL, LockCL2, LockCL3).
  1. The time between the orders for each trading instrument shall be established program settings (as well as for Lock, LockCL, LockCL2, LockCL3).
  1. Imitated Hand Trading Broker “sees” you are trading hands and not a robot trades for you (as well as for Lock, LockCL, LockCL2, LockCL3).
  1. One trading account shall not have one opposing (locking transaction) tool (for this strategy only)

 

But to use the strategy you will need three accounts with a minimum deposit of $200-$300 on each account if, of course, your broker allows you to trade the minimum lot 0.01 in increments of 0.01. You can only trade on currency pairs as The minimum Indices lot may be higher. With the minimum lot of 0.1, your minimum deposit required is $2,000-$3,000. If you open accounts with the same broker, you need to open accounts for different names, with a break of 3-4 days (so that accounts were not in a row) and from different IP addresses. Also to connect accounts to DAAS using IP Changer (your VPS provider can provide you with additional IP addresses and IP Changer will allow you to run each account with a unique IP address. Avoid the major mistake that many beginners make Traders are checking the status from one computer or phone. If you Open 3rd accounts with different brokers, you can do it under one name and not use an IP changer. In case you do not for any reason do not want to open 3and accounts, but can open 2a MT4, MT5, cTrader, then you will be most suitable strategy LockCL2. For 2x FIX API accounts I would recommend DAAS with LockCL Built-in strategy.DAAS Built-in strategies: Lock, LockCL, LockCL2, and LockCL3 preserve all masking. Arbitrage strategies are the same as BrightTrio except for the 5th. I.e. the broker will see back-to-back deals on one instrument per account. For additional masking of the above strategies, you will find statistical arbitrage and triangular arbitrage DAAS built-In strategies.

Is my broker suitable for arbitrage?

The most important indicator of whether or not a broker is suitable for arbitrage trading is the time of execution of the order during an active market. Increased execution time can lead to an increase in slippage and slippage can “eat away” the profit of the arbitrage strategy. To test the broker, you need to open a real account with the broker and test how long the order is modified during arbitrage situations. Forex Brokers Test Kit can help. The program will modify the orders during arbitrage situations and measure: spread, slippage, execution time. To complete the picture you need to test several tools EURUSD, GBPUSD, XAUUSD, GDAXI. Many brokers allow the placing and modification of pending orders in a zero deposit account, i.e. you do not need to deposit their test. Systematic but not permanent slippage on MT4, MT5, cTrader accounts up to 10 -15 points can be considered normal. Slippage on FIX API accounts is limited by the use of FOK and IOC limit orders and cannot be measured in advance, but only tested in real arbitrage of the minimum lot. It should also be understood that when increasing the lot, slippage may increase due to lack of liquidity on the top of the book and the broker will “get” liquidity from the next layer, averaging the price.

Crypto Arbitrage Trading

In the baseline scenario, the S&;P 500 will grow by only 9% in 2022, to 5,100 points, including dividends – by 10%. In comparison, since the beginning of this year, the index has already increased by 27%, and since March 2020 – twice. Slower economic growth, tighter Federal Reserve policy and rising real rates are factors in favor of investors not having to wait for the same rapid growth in 2022 and this provides the prospect of increased investment in cryptocurrencies in the mean and prospects for crypto arbitrage. For crypto arbitrage trading you need DAAS with latency and Hedge built-in arbitrage strategies. Latency trading is similar for traders with small deposits. Trading is conducted by altcoins and the deposit is held in one of the basic cryptocurrencies, for example, in ETH. The hedging strategy will suit traders with large investments, but you need to be prepared that to trade several cryptocurrencies, you will need to have a deposit in each of them, which is risky due to high volatility in the cryptocurrency market. A bullish market would yield additional gains, and a bearish market could yield losses that exceed arbitrage gains.

How to start News Trading in 2022

To trade on the news you will need a software product NewsTraderPro and a broker with good liquidity for all trading instruments. You also need to understand which economic indicators are important for the market at the moment, and what will not drive the market. What Can Be Problematic in News Trading:

  1. The broker turns off the feed or server a few seconds before the news
  2. Orders slip quite hard
  3. Orders shall not be executed by a broker

For any of the above problems, I would recommend changing the broker.

VPS Selection for Arbitrage and News Trading

First of all, I want to warn against using the VPS provided by brokers companies as account opening bonuses. These VPS’s can be controlled, slowed down, and just low quality. You need to remember once and for all that bonuses from using VPS for high-frequency trading with good characteristics is already 30% of success.