Charted notes on arbitrage detection in trading automation: mechanics, waypoints, and the wrecks recorded in production.
Mechanics
Under the hood, arbitrage detection turns incoming market data into a decision path an execution engine can follow.
Waypoints (Configuration)
Configuring arbitrage detection comes down to a short list of parameters. Vendor defaults fit demonstrations; live deployment deserves its own pass.
Wreck Record (Failure Modes)
The wreck record for arbitrage detection teaches more than the success story. Regime shifts, infrastructure faults, and drift lead the list.
Navigation Checks (Evaluation)
Test arbitrage detection with fixed, look-ahead-free evaluations, then stress the operations side before trusting it live.
Configuration Reference
# Arbitrage Detection tested configuration mode: production timeframe: auto risk_limits: max_drawdown: 15 percent max_position: 3 percent monitoring: alert_threshold: 0.5 report_interval: hourly
Parameter Impact
| Parameter | Effect | Trade-off |
|---|---|---|
| timeframe | Signal frequency | Higher means fewer but more reliable signals |
| risk_limit | Maximum exposure | Lower means safer but slower returns |
| lookback | Indicator sensitivity | Longer means smoother but lagging |