The concept of currency arbitrage and its types

The international currency market Forex – is a global interbank market, which provides services to the commission deals with the currency and the execution of various currency transactions. Today, the Forex market is a telecommunications network, whose participants are both natural and legal persons. Every day millions of transactions in the currencies of various countries of the world go through the auction of this international exchange.

In the Forex market there is “Forex arbitrage”, which represents a specific algorithm for a financial transaction. With it, you can earn income from reselling money. Everything you need to account for exchange rate fluctuations at different times of the day within one or more markets.

There are several types of Forex Arbitration:

Forex Temporary Arbitrage – Based on the difference in the rates of currency pairs at different times of the day, it is most common in the Forex market.

Cross-Forex arbitrage operates on the principle of simultaneous synchronous changes in exchange rates in the two pairs of units, for example, USD/EUR and GBP/USD. Traders often use these cross rates to conduct financial transactions with currencies and profit from the difference that occurs.

Interbourse Forex Arbitrage (version 2) is basically based on the difference in exchange rates, which is present in various stock exchanges, but its conduct in the existing conditions of the Exchange is very difficult.

Also, Forex arbitrage can be simple or complex. In the case of complex Forex arbitrage, you need to carefully monitor the dynamics of exchange rates of participating in the auction. Trading Forex Arbitrage version 2:1 is a simpler form of interaction and is more common for financial transactions. The need for arbitrage in the first place is to make forward transactions to buy and sell currency options. The option must be implemented, and its terms and conditions depend on the type and mandatory provisions of the signed contract

In general, the choice of trading strategy depends on many factors to consider when participating in the foreign exchange markets. Great care must be taken as most traders seem to lose money rather than make money in the forex markets. Over 90% of retail traders (those who don’t trade gold for banks) actually lose money on forex, so this statistic should tell you that you can’t enter the forex markets without a solid game plan for your trading .