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CFD arbitrage on forex

As of now, more and more Forex brokers provide the opportunity to trade CFDs (Contract For Difference) on various instruments (stocks, futures, commodities, etc.). That significantly increases the number of arbitrage posssibilities that occur. In addition, most CFDs are illiquid, making arbitrage opportunities last for a very long time (for arbitrage), sometimes up to several minutes, allowing entering the market without any slippage.

Here is an example of real CFD arbitrage on platinum futures between two different dealers using Megatrader software.

First we get data for both CFDs from our brokers:

The chart shows that arbitrage opportunities occur now and then! For example, buying at -2 (red line) and selling at 0.5 (green line) will net us guaranteed 1.5 points. Note that there is nearly no risk as price is guaranteed to revert to its mean. Of course, possible commissions and slippage should be also taken into account. Megatrader script in this case will buy if Offer is less than -2, and close position at bid greater than -0.5. This must be checked out on a demo account to see if it works.

If profit accumulates mainly on one account, one-legged arbitrage has to be used.

When configuring it is necessary to set the level of slippage (difference between expected price and actual execution price) for opening and closing deals.

A check "Perform the first" means that opening of second leg will be only after first one is opened.

You can also set the Take Profit and Stop Loss levels. "0" means that levels are not set.

Many real examples of CFD arbitrage trading can be found in the Statistics section.