(X/Y / Z/Y - X/Z) - would be appreciate for some additional information.
Ignored
If, for example, the difference between EUR/USD / GBP/USD and the rate of EUR/GBP (on the same broker or on the different ones) is higher than the spread, then you can successfully lock some risk-less profit.
If, for example, the difference between EUR/USD / GBP/USD and the rate of EUR/GBP (on the same broker or on the different ones) is higher than the spread, then you can successfully lock some risk-less profit.
Well to answer that , first let’s talk about what is arbitrage:
Arbitrage is a situation which gives an investors the opportunity to take profit out of a position with no risk at all. Most of the times arbitrage is possible only when there is mistakes in the markets price; it can happen in stocks when a stock is dual and trades in more than one stock market ,an arbitrage trader is looking for the distortions that might appear in these two stock market and try to make profit out of it. In forex it works according to the same concept, to find an arbitrage deal we need to connect to more than one broker and to look for a gap between their quotes. It may be easier to find this gaps between 2 or more brokers that their geographic location is far from each other, Tokyo, London, New-York etc…their quotes might be influent by the local traders trend and we might be able to find a few pips gap. The gaps we are looking for might be between the real rates of the majors and the synthetic quotes of the crosses. For example: Tokyo , GBPUSD : 1.6388/93. Ney-York, EURUSD1.1832/37. London , EURGBP: 0.7231/36 There is a potential of free risk profit when buying 100,000 eur at price 118,370$ this is the initial investment funds. Selling 100,000eur for 72,310 gbp, and selling 72,310gbp for 118,501 usd. This is a profit of 131$ per 1 lot. On the surface it looks easy and simple but the truth is that in order to find this opportunities it is required developed technology and strong will. More than that, in order to realize this arbitrage profits it takes an agreed contract with this companies or their liquidity providers to clear this positions at the open price. There for, I do not recommend to rely on arbitrage deals as your main strategy, but as a small part of your whole forex trading strategy it might be a good idea.
