Forex Trading Blog | Currency Arbitrage
Forex Trading Blog
Currency ArbitrageAnother nifty buzzword that many forex traders and pretty much all traders throw around, is “arbitrage”. This forex trading blog article will first talk about the definition, then we will go into details of the trading structure, as well as the viability of this trading strategy. Currency Arbitrage is taking advantage on an extremely small time frame during Forex trading hours. Basically, the trader will look at 2 banks for a currency pair. This example is a pre-school example as our site is comprised of tips that I hope everyone can learn from. These results NEVER happen, they are comprised of pennies and fractions of pennies. In our “example” Bank A’s charts are showing that 1.5 euros = $1.00 Bank B’s charts are showing that 1.5 euros= $1.50 So an arbitrage trader would see this as an opportunity to pounce on some risk free money. He would convert his dollar into euros with bank A and end up with 1.5 euros. He would then convert his 1.5 euros to $1.50 by using bank B. After all of this he has made $.50. Arbitrage trading can be looked at as a fairly risk free way to trade forex. Although our fantasy example did yield us $.50, most real time forex arbitrage traders will gain fractions of a cent. Not only that, banks are aware of arbitrage trading and they try to close the gaps as soon as they are found. So this time frame will be extremely limited to traders to test this out. We will talk about other “low risk” opportunities in our new miniseries in our forex trading blog. One issue from our forex trading blog post is that if it is good for the newbie trader. In my opinion, the answer is heck no! There are SO MANY other different things you need to be focusing on when starting out in trading. Remember, it is a marathon and not a sprint. If you want to try and grab some pips through arbitrage trading when you are first starting out, you are missing the big picture of forex trading. Sure it sounds amazing on paper, however the time frame to do these trades are so small, and the net gain might not even be worth it. Most people who do arbitrage trading have very expensive software which will help detect the gaps quickly.
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