Search Investopedia

Forex Arbitrage

Filed Under »
Dictionary Says

Definition of 'Forex Arbitrage'

A trading strategy that is used by forex traders who attempt to make a profit on the inefficiency in the pricing of currency pairs. The strategy involves reacting quickly to opportunities, and is usually accomplished through the use of computers.
Investopedia Says

Investopedia explains 'Forex Arbitrage'

As with other arbitrage strategies, the act of exploiting pricing inefficiencies will actually correct the problem in the market. For this reason, these opportunities are often only around for a very short time. Arbitrage currency trading requires the availability of real-time pricing quotes and the ability react quickly as opportunities present themselves.

Forex arbitrage calculators are available to help find these opportunities more quickly, but as with all software, programs and platforms used in retail forex trading, it is important to try them out in a demo account if possible. Trying out multiple products before deciding on one is the only way to determine what is best for the forex trader.

Related Definitions

  •

    Authorized Forex Dealer

    Any type of financial institution that has received authorization from a relevant regulatory body to act as a dealer involved with the trading of foreign currencies. Dealing with ...
    Read More »

  • Base Currency

    The first currency quoted in a currency pair on forex. It is also typically considered the domestic currency or accounting currency. For accounting purposes, a firm may use the base ...
    Read More »

  • Cable

    Slang used among forex traders referring to the exchange rate between the U.S. dollar and the British pound sterling. Because it is the norm in forex for most major currencies to be ...
    Read More »

    • Currency Pair

      The quotation and pricing structure of the currencies traded in the forex market: the value of a currency is determined by its comparison to another currency. The first currency of a ...
      Read More »

    • USD

      In currencies, this is the abbreviation for the U.S. dollar.
      Read More »

    • Daily Cut-Off

      In the forex market, a particular point in time specified by a forex dealer to stand as the end of the current trading day and the beginning of a new trading day. This is done for ...
      Read More »

    • Forex - FX

      The market in which currencies are traded. The forex market is the largest, most liquid market in the world with an average traded value that exceeds $1.9 trillion per day and includes ...
      Read More »

    • Forex Futures

      An exchange-traded contract to buy or sell a specified amount of a given currency at a predetermined price on a set date in the future. All forex futures are written with a specific ...
      Read More »

    • Interbank Market

      The financial system and trading of currencies among banks and financial institutions, excluding retail investors and smaller trading parties. While some interbank trading is performed ...
      Read More »

    • Quote Currency

      The second currency quoted in a currency pair in forex. In a direct quote, the quote currency is the foreign currency. In an indirect quote, the quote currency is the domestic ...
      Read More »

Articles Of Interest

Sponsored links
Hot Definitions
Partner Links
Suggested Definitions