Forex arbitrage trading strategies are used when an investor wishes to take full advantage of Forex market inefficiencies. Arbitrage helps to correct the inefficiencies and in doing so will help in bringing all price levels into better harmony.

Look For Inconsistencies

Forex arbitrage trading is all about first looking for inconsistencies in three or even more pairs of currencies and then making a profit from any miss-pricing of these pairs. A trader that wants to trade in the US dollar, Euro and the Canadian dollar should know, for example, that one US dollar can help them purchase 1.2 Canadian dollars and that 1.2 Canadian dollar will allow them to purchase 1.5 Euros.

What this means is that a single US dollar can help you purchase 1.3 Euro. An arbitrage trade would require that you purchase the Canadian dollar with the help of US dollars and then you need to use the Canadian dollar to purchase Euros and then all that remains is to sell the Euro back for US dollars. This will result in a profit of about 0.2 Euros.

Pricing Inefficiencies

As mentioned, Forex arbitrage trading is all about profiting from whatever pricing inefficiencies exist in the FX market. Capitalizing on such inefficiencies, an astute trader will be able to earn fast money. All that the astute trader needs to do is spot the inefficiency and then make a quick trade before anyone else gets wise to their strategy. In other words, you have to be the first to capitalize on market inefficiencies because once others join in the forces of demand and supply will eliminate these inefficiencies.

If you want to get more out of Forex arbitrage trading, you might want to look at the benefits of using automated FX software that can be used to identify the best spot opportunities, and in some cases, it can also execute a trade on your behalf.

Many traders are making use of such software and given that the pace with which you need to execute a trade is very high, this option can prove highly profitable. The really experienced traders like Yee Kok Siong (http://yeekoksiong.strikingly.com/) prefer making their trades manually because they are able to read the signs in the market and interpret other economic factors which allow them to spot a good opportunity and then act on it before FX software users move in for the kill. For this, it becomes necessary for them to obtain price quotes in realtime because the opportunities will be coming and going at a very rapid pace.

Use a Calculator

To make the most out of Forex arbitrage trading, it is absolutely necessary to make use of a good Forex arbitrage calculator that will help in identifying the inefficiencies in price at the required rapid rate. These calculators can easily do the math required to compute the best price for three or more foreign currencies and so is a very useful tool for you.

It makes sense to first practice with a demo account and then start with Forex arbitrage trading. This way, you can learn how to spot the inefficiencies in the market without investing your money. Once you are confident that you can make the trade and earn a profit, you can then get started with using your real money.

The bottom line is that Forex arbitrage trading requires learning a new and special skill. Therefore, you must practice it and hone it till you are sharp and confident that you can always spot the right moment to execute a trade and make a tidy profit from doing so.