Forex arbitraging is defined as making a grain or profit by buying and selling of currencies which are priced wrong. The market in which trader buys the forex has a lower quote and the market in which the currency is sold has a higher quote for the same currency which allows the trader to make profits out of that transaction. As an example, if a person buys US Dollars for Great Britain Pounds and sells those purchased US dollars to buys Japanese Yen while converting those Japanese Yen to Great Britain Pounds makes a profit for the person explains the concept of arbitraging. The existence of arbitraging profits can be determined through the calculation of cross exchange rates for relevant currencies where the cross exchange rate is favorable than a direct/spot exchange rate would give rise to a arbitrage profits. Even though the arbitrage profit made per nit of currency is small, when transacting in Millions the profit made can be seen as very significant. Similarly there can be arbitrage losses where the buying and selling forex could lead to loses in different markets.
Arbitrage has to be done fast as the opportunity to arbitrage does not last so long as the market gets corrected in their pricings. Making money in fractions of a second through profit arbitrage has become a new financial opportunity for experts in Forex where Arbitrage calculators assist them with locating their currencies in right market at right time. There is a need for high speed information transmitters for the arbitrage to work effectively as the time is limited to make the profit out of the transaction which as to occur in different markets. Additionally, arbitraging can be seen profitable only if the currencies are traded in large scale as the transaction cost needs to be covered through the margin made out of the transaction.
