In the world of forex, there is an opportunity within arbitrage. This might seem confusing to newcomers, but it is basically a way to spot inconsistencies and inefficiencies within the marketplace and to potentially make quick trades to take advantage of this. Being alert and analysing the market can be a good way to potentially make money through arbitrage.
If this all sounds a little bit confusing, the good news is that there is plenty of help out there. Forex arbitrage software can send you alerts or even, in some cases, make your trades automatically, based on the rules you have set. But more on that later as we explain this in a way that the novice trader can truly understand.
How arbitrage works
In the forex currency markets there may be some discrepancies, often between brokers asking for slightly different rates. This may be momentary, but if you are quick enough, you might be able to take advantage of these different rates before the market catches up.
Arbitrage is described as “an investment strategy in which an investor simultaneously buys and sells an asset in different markets to take advantage of a price difference and generate a profit” by the Harvard Business School.
Speed is of the essence when it comes to arbitrage, and those who have the advantage of using software solutions may also find it easier to spot the opportunities that are on the market. A forex trading account and some arbitrage software might be all you need to get started.
The same happens in other markets such as buying and selling assets, so this is not restricted to currency exchange.
How software can help
There are software solutions for virtually everything in the modern age, from tracking bands on tour to making money online.
Many forms of software can be installed to open up opportunities around trading. Of course, they need to be used correctly and responsibly, and nobody is suggesting trading on autopilot.
Arbitrage software is a clever way to analyse the market and mainly shows you when things are deemed to be incorrectly priced on a forex market.
Some software does even have the capacity to make automatic trades on your behalf, which means that you don’t have to stay on track all the time. Such software can work by making trades based on predetermined parameters that you set. Some will request approval but others are able to make some trades totally on your behalf.
Arbitrage alert programs
Perhaps the most popular form of arbitrage software involves getting arbitrage alerts. These come in different types, but they provide you with a notification or an alert when an opportunity is spotted. It’s a bit like having a full-time scout on the forex market.
You can set these arbitrage alert programs to let you know about the opportunities in whatever manner you see fit. Some will send emails, some notify you on your phone, others can even provide you with a text message to tell you there is an opportunity to invest.
As with all money matters, it is really important to do your research and make the right decision about the type of software. The best software can spot good opportunities, whereas some of the other software may promise a lot but not deliver so much, so do your research before downloading.
Remote alerts
If you don’t have the inclination or capacity to run software the whole time, then there are still ways in which you can take advantage of arbitrage software. Some arbitrage software will run in a central location and the companies in question will then provide you with alerts directly to your email or via an app.
This way, you don’t have to use your processing power and you can still get alerts – the downside can be that these alerts are also going to a lot of other people, so the discrepancies may get fixed a little quicker and your window to invest might be much shorter.
Summary
Forex arbitrage is becoming popular as many people look to build a strategy that can potentially help them with forex trading success. It’s not perfect in every way, but it can be a worthwhile investment for those who are constantly looking for opportunities to make wise trades. For the novice trader, getting to grips with forex arbitrage software early on can also be a good way to get used to the industry and how it works.
Featured image credit: Pixabay
