Triangle Forex Arbitrage Strategy
Triangle Arbitrage is forex trading strategy, it is also called triangular arbitrage. It is total risk free. Triangle Arbitrage is different trading strategy, and as the name suggest it includes trading 3 different different currencies pairs almost simultaneously to profit from exchange rate difference between them.
The price of one currency pair depends on one or more other currency pairs , in this global forex market. The basic formula for the relationship of three related currency pairs, having 3 different currencies, is as follows.
XXX/YYY x ZZZ/XXX = ZZZ/YYY
If this equation goes wrong then arbitragers comes in trade. Only in that condition chance occurs for Triangle Arbitrage. A triangle arbitrage buys YYY against XXX means exchange of XXX , then buys ZZZ and spend YYY and at last returns XXX and exchanging ZZZ, and capture a small profit. For Arbitraging A a Large amount of margin is required and if you are using the broker’s margin , then you can make a good profit.