The forex market has many profiting opportunities. Many of them are related to news, like interest rate changes or the employment report. Some of them are related to trading systems which can generate a long term income stream. Few traders can trade on their own, without any other distractions. All these methods involve risk. However, there is one method that does not involve any risk at all. It is called arbitrage.
Arbitrage is the action done on assets that are traded in two different markets. To make a profit, the two markets must have different prices for the same asset. When such a difference exists, traders can buy the asset in the market with the lower price and sell it higher on the second market. Since this price difference attracts many traders, it is closed very quickly. However, there are more clever types of arbitrage which you can use.
Forex arbitrage can have a few forms, but the most popular ones involve two currencies and three currencies. Two currency arbitrage can be done with two different brokers offering different spreads. The two spreads imply that there must be at least one quote which differs between the brokers, either the bid, the ask, or both. Whichever that is, a smart trader can use this situation to make a safe profit.
Three way forex arbitrage is more sophisticated and harder to catch. It requires a true understanding of exchange rates. This type or arbitrage happens when the exchange rates of three currencies don't match all ratios, and there is a gap between expectation and reality. For example, if one currency is worth twice the second one, and the second one is worth three times the third, then the first one is equal six times the third. If one of these numbers is changed without properly changing the others, it opens a door for many arbitrageurs.
Currency arbitrage may be risk free, but doing it properly takes patience and very complex computer programs. They also tend to close extremely quickly, as they are being used by others. If you see an arbitrage opportunity, try your best to use it, but don't devote your entire time for arbitrage. Making a living this way is very hard, since those opportunities are very rare.
