I keep seeing online forex-related information about arbitrage trading (Youtube, PDFs, forum discussions, informational websites, courses, etc.), and how profitable it can be, with low risk.
I have a little difficulty believing it.
Am I being unduly skeptical? Is it actually a viable, long-term strategy, when trading forex?
Lots of people recommend it and say they use it, but remember most traders are losing money, so who knows?
Most brokers do not permit arbitrage trading - if they think you’re using it they may close your account and cancel unrealised profits.
Thanks very much, @tommor .
I’d heard this, and wondered about it. In a way, that makes me think maybe you can do it profitably (would they bother banning it, if not?) but then again they might just be “reserving their right” to try it on as an excuse and have it in terms of service to cite, later, if they want to?
I agree - if it couldn’t be used profitably, why would they ban it?
I don’ think many brokers have as a business strategy closing accounts and ejecting clients. They probably believe most profitable traders will become unprofitable if they only have enough time.
Arbitrage trading itself is legal in the United States and contributes to market efficiency. However, many forex brokers, including some of those operating in the USA, explicitly prohibit certain forms of arbitrage, especially latency arbitrage, through their customer agreements and terms of service.
Traders in the US should carefully read their broker’s terms and conditions to understand which strategies are permitted. The legality of the strategy generally depends on the specific method used and the broker’s explicit policies.
Regulatory Compliance: While general arbitrage is legal, brokers need to ensure all trading activity on their platforms complies with regulations set by bodies like the CFTC and NFA. They may prohibit certain strategies to avoid legal or compliance issues associated with market manipulation concerns.
When brokers identify abusive trading practices such as latency arbitrage, the consequences often extend beyond the trades in question.
Brokers may reserve the right to confiscate all profits ever earned on the account, even if some profits were made through legitimate means. If your trading behavior is deemed manipulative, your entire profit history could be erased as part of the enforcement action
How to Check Broker Terms for Arbitrage Policies
Before deploying any strategy—especially one that is high-frequency or uses automation—it is critical to read your broker’s legal documentation. These include:
Terms of Business
Client Agreement
Order Execution Policy
Risk Disclosure Statement
Look for specific keywords:
Price arbitrage
Latency
Price disparity
High-frequency trading
Order cancellation
Profit reversal
Execution abuse
An example clause might read:
“The Company reserves the right to void or reverse trades that are the result of latency arbitrage, including trades executed on delayed or off-market prices.”
If the documentation is ambiguous or lacks detail, contact support directly and ask:
“Do your policies permit latency-based or quote-delayed arbitrage strategies, such as those used by EAs?”
Getting a written response offers clarity and, if needed, proof of pre-trade transparency.
Real arbitrage in forex exists but big banks and ultra-fast computers grab it long before retail can.
Most “arb” you see online is either not true arbitrage or gets killed by spreads, slippage, and broker rules.
For regular traders, it’s usually better to focus on a solid strategy and risk control than chase “risk-free” edges.
As far as CFDs go, this is the reality.
No currencies are changing hands between a retail forex trader and his “broker” anyway.
Your skepticism is justified. Arbitrage in forex can exist, but it is usually a high-speed, low-margin opportunity that large institutions and algorithmic systems exploit using advanced infrastructure. Retail traders rarely have the execution speed, liquidity access, or pricing data required to profit from those tiny differences before they close.
Most “retail arbitrage” strategies promoted online rely on delayed data or price discrepancies that vanish instantly. Even when they work briefly, spreads, slippage, and latency erase profits. True arbitrage is technically possible, but for individual traders it is not a practical or sustainable long-term strategy.
the way i see it, its very profitable with risks of loosing your account, many broker disallow it, but im pretty sure there are people that are going through workarounds and will not talk about it. it would be nice to know/learn tbh LOL
The “information” you mention there comes from people selling “information,” though, doesn’t it?
That always makes me think the source of their own income is selling shovels rather than digging for gold.
What makes you think it’s so profitable, @jingoy ?