Practical Forex Arbitrage Strategies

forex arbitrage trading


by Alexander Demin

==> The modern Internet is full of tempting offers about easy earnings in the Foreign Exchange Market (Forex)…

It seems to be enough just to guess correctly the direction of the forex market movement, and then you will have a comfortable trading existence. However, the statistics are well known, which suggests that more than 80% of Forex traders eventually lose their money. This is due to the fact that, contrary to advertising hype and promises, financial markets are almost impossible to predict.

On the other hand, not everything is so bleak and sad. There are forex trading strategies that are not based on predicting the direction of future market movements, but instead on other strategy. An example of such a strategy is the forex arbitrage, which is based on the extraction of profit from the price difference of the same financial instrument presented on different forex exchanges.

As a result, that arbitrage strategy allows you to earn in any market movement, and it does not require the trader to guess the direction of movement of any forex financial instrument.

==> Let’s discuss in more detail what the essence of forex arbitration is…

The main idea of these strategies is to take two (or more) identical or linked assets traded on different sites, and when the price on one exchange becomes more than another, then make an arbitration deal. In other words, sell the asset where it is more expensive, and buy where it is cheaper.

When the prices on the forex exchanges are equal, then it is necessary to perform a reverse operation, and close your positions. As a result, each arbitrage transaction will yield a guaranteed profit, independent of the market movement.

==> The strategy described above is known as the classical two-legged arbitration…

However, in some cases, particularly in forex, it is more advantageous to use a one-legged arbitrage, in which transactions are carried out only on the side of one broker, which is a “lag” in relation to the second broker.

In those cases, when the quote of one of the brokers is later than the second broker, the profit from the arbitrage deals will accumulate on the side of the lagging broker. As a result, there is no point in opening the opposite transactions of the second broker.

==> Consider what options exist for implementing arbitrage strategies in Forex…

Firstly, the most famous option is arbitrage of exchange rates. In this case, usually only one-legged arbitration is used, because of the situation when the quotes of one broker is later than the quotes of second broker.

Secondly, a wide range of options are provided by the arbitration between those CFD-contracts traded in Forex, and the stock exchange instruments. In particular, you can use quotes from the stock exchange as a leading source, and trade only CFD-contracts.

Thirdly, it is possible to arrange arbitration between futures, for example, from the CME futures market, and CFD-contracts for the underlying assets of those futures traded in Forex.

==> In conclusion, we note that modern trading is characterized by the highest degree of competition among bidders…

The trader who has not only the best trading strategy, but also the best trading software, wins. Arbitrage trading is a high-tech way of earning, which requires a special software program. Therefore, you need a trading robot capable of performing simultaneous operations on various trading floors.

On the website:, you can find useful information, which will give you an opportunity to build a successful forex arbitrage strategy. Megatrader software can accommodate forex arbitrage strategies, or stock market strategies, of any complexity.

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