Arbitrage is an investment strategy in which an investor buys and sells an asset in different markets at the same time in order to profit from a price difference. While price differences are typically small and transient, the returns can be substantial when multiplied by a large volume. Hedge funds and other sophisticated investors frequently use arbitrage.
There are several types of arbitrage, including retail arbitrage, statistical arbitrage, and convertible arbitrage. Retail arbitrage is used to buy and sell physical products such as those found on eBay or Amazon. Buying a convertible security and then shorting the underlying stock is referred to as convertible arbitrage. Then there’s statistical arbitrage, which uses complex mathematical formulas to trade markets programmatically in order to profit from even minor price differences.
Most brokers out there have strict rules and regulations that prohibit arbitrage trading. The list below is therefore very limited as not many brokers directly state they support arbitrage trading. One of the few exceptions is Tickmill which is very transparent about this. I recommend double-checking with a broker of your choice if they are ok with arbitrage trading, just to be on the safe side it’s not against their terms and conditions.
Tickmill
Tickmill is a globally recognised forex and CFD broker that allows arbitrage trading. The broker empowers its traders to reach their full potential by supporting all trading strategies including arbitrage, expert advisors, hedging, scalping, and more. Notably, Tickmill is regulated by various authorities, including the FCA in the UK, the CySEC in Cyprus, the FSCA in South Africa, and the FSA of Malaysia.
Tickmill offers a variety of account types, including Classic, Raw and Tickmill trader Raw, with spreads starting from as low as 1.6 pips on the classic account. The trading platforms available include MetaTrader 4 and MetaTrader 5, alongside mobile trading apps. With a minimum deposit requirement of $100, Tickmill is accessible to both novice and experienced traders looking to engage in arbitrage trading.
RoboForex
RoboForex Ltd is a financial brokerage firm regulated by the International Financial Services Commission Belize, the Financial Services Commission, and the CySEC. It provides Forex, EFTs, and CFDs on stocks, indices, ETFs, commodities, metals, energies, and cryptocurrencies as trading instruments. Popular platforms include MetaTrader 4, MetaTrader 5, and cTrader. There are four types of accounts; Prime, ECN, R StocksTrader, ProCent, and Pro. Traders can enjoy these accounts with spreads starting from as low as 0.0 pips and others with spreads starting from 1.3 pips. The minimum deposit is $10. It allows for statistical arbitrage and latency. The goal of arbitrage is to profit from receiving data quickly.
Admirals Markets
Admirals Markets is a trading platform for trading currencies, among other instruments. It is regulated by the ASIC, the CySEC, the FSCA, and the FCA. You can trade using popular platforms such as MetaTrader 4 and MetaTrader 5. The type of account you will use is determined by these platforms. MetaTrader 4 can be used to access Trade.MT4 and Zero.MT4. On MetaTrader 5, you can choose from three accounts: Trade.MT5, Invest.MT5, and Zero.MT5.
Other than forex there are also CFDs on stocks, indices, and energy. Invest.MT5 requires a minimum deposit of 1 USD. Average spreads for major currencies start as low as 0.6 pips. Some of the well-known arbitrage trading software programs that are widely used in the Forex community for arbitrage trading in Admiral Markets fall into three categories. These include alert programs, remote alert programs, and automatic trading software programs.
Final comments
Arbitrage allows a trader to profit from price differences in assets, but it requires trader’s quick decision-making and constant attention to the market. Prices in the financial markets usually correct themselves quickly. As a result, you will need to act quickly to capitalize on these trading opportunities. Be aware that arbitrage trading can be very risky and result in the loss of your capital. To make sure the broker of your choosing supports arbitrage at the time of your reading we advise on double-checking their terms and conditions.
The table below contains links to 3rd party websites of our top partners from whom we receive compensation at no additional cost to you.
