conversion arbitrage

Definition

Forex

  • An advanced trading strategy without risk that profits from the minor inefficiencies inherent in most markets, including Forex. Opportunities for an arbitrage trade typically only last for a few moments. Any imbalance is generally spotted on the floor and a professional immediately closes the gap with their own arbitrage trade. When two blocks of equivalent securities are priced differently, the overpriced one is sold and the underpriced one is bought. The difference is pocketed and parity on the market (or monetary system, in the case of currencies) is restored.
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