Believe it or not there is an opportunity in Forex for one to guarantee a successful trade. Imagine that. Being able to enter the market and have a 100% assurance that you will come out a winner. The concept is called arbitrage trading. An arbitrage opportunity exists when there are discrepancies in the market between brokers.
Allow me to create an example of an arbitrage.
Broker A has GPB/USD currently exchanging at 1.6388/1.6393, while Broker B has EUR/USD exchanging at 1.1832/1.1837, and Broker C is exchanging EUR/GBP at .7231/.7236.
There is a simple calculation to see if an arbitrage exists.
AAA/BBB * CCC/AAA = CCC/BBB
If for whatever reason this calculation does not equate each other evenly, an arbitrage exists and there is an opportunity to create a risk free profit.
If you were trading a standard lot, you would need to buy 100,000 Euros at 1.1837 while selling 100,000 Euros at .7231. Finally, you’ll need to sell the equivalent amount of the Pound that you had purchased in your EUR/GBP trade. In doing so you have essentially bought and sold the exact same amounts. In the process you guaranteed yourself $131 of risk free profit.
Does this sound too good to be true?
Well, arbitrages do in fact exist. However, they are extremely difficult to capture as price is always moving and when an arbitrage does exist you need to work extremely fast to be sure you are able to capture the arbitrage at the prices needed.
Then there is also the matter of having to spot the arbitrage itself. You would need to have a good amount of brokers that you have an account with and constantly scanning the various markets seeking out the discrepancies. Not a simple task.
And lastly, you are only guaranteeing yourself a risk free trade if the trade is placed accurately. When moving as fast as you need to, there cannot be any room for error. You will have a large amount of money in the market in exchange for a small sum of guaranteed profits. You do not want to make the mistake of entering the market incorrectly and finding all your money is at risk. That defeats the purpose.
You would essentially need some sort of computer software to automatically scan the market for you, find the arbitrages, and place the orders for you at the price you need them to be at. With all that said… Good luck.
If it’s automation you want, you don’t need to seek out a computer to scan arbitrages. Success in the market is not simply isolated for risk free trading. The FX Trading Network has recommended Netpicks as a signal provider. Netpicks has been around since the dawn of Retail Forex and they have been providing winning signals since. Try them risk free
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