I came across this in a online lecture. But couldn't wrap my head around it.
Lets say I have accounts with two brokers/ECN/STP. Now consider the following scenario for currency pair USD/JPY
Broker1: Bid-110 Offer-111
Broker2: Bid-112 Offer-113
Now we will apply the simultaneous buying of the pair and selling strategy. Lets say I
Buy 500$ at 111 from Broker1 and
Sell 500$ at 112 to Broker2
Considering no order expiry etc the lecturer says the profit is 500 Yen.
But the account with the Brokers are different.
In the above scenario when I
Buy 500$ at 111 from Broker1 --> I bought 500 USDs at 111 rate (opened a position)
Sell 500$ at 112 to Broker2 --> I sold 500 USDs at 112 rate (opened a position)
Now since the account isn't one unless I sell the 500USD at Broker1(close position) and Buy 500USD at Broker2(close position) there won't be any gain for me. What I am saying is the rate might not change in my favor in near future when I try to close position. Lets say when I close position the rate is same Broker1 rate is 110 and Broker2 rate is 113 only. So basically I loose 1000Yen.
But in the lecture it says you will gain 500Yen. Shouldn't it consider the closing position thing too? That is the rate at the time of closing position is important.
Is there something I am missing?
Is it to do something with Swap Arbitrage(don't know well).
Or does the position closes automatically or depends on the account type or order type?
Or is there a way to have a single account and link it with different brokers something like single trading account.