Forex Arbitrage Trading Software: Which One to Choose?

May 21, 2021 08:30 UTC
Reading time: 12 minutes

This article will explain how to choose arbitrage trading software for Forex trading, as well as, why traders use Forex arbitrage trading software, how Forex automation software works, the ins and outs of Forex automation software, how alert programs work, and more!

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Arbitrage Trading Software In Forex

The Forex market (FX) is full of different opportunities and different trading strategies. One particular area of interest is Forex arbitrage trading, and Forex arbitrage trading software can help to implement this strategy.

Arbitrage trading aims to profit from temporary market inefficiencies, which results in the mispricings of similar assets within various markets, or with different brokers in the FX market. This method carries a high level of risk.

Arbitrage trading assists in quickly correcting temporary inefficiencies in prices, bringing them back in line across different financial markets, brokers, or various other forms of the same financial instrument or asset.

In fact, short-term imbalances, which form the opportunities for arbitrage trading, perfectly present a trader with the possibility of performing buy-sell trades simultaneously. Those trades lock in a small profit resulting from pricing variations.

For instance, in the Forex market, there can be a minimal temporary discrepancy between the exchange rate for EUR and GBP, and the two related currency pairs: EUR/USD and GBP/USD. This can empower a trader to profit from simultaneously selling EUR/USD, and buying EUR/GBP and GBP/USD.

Since arbitrage trading opportunities tend to exist for a very short-term period (often just a few seconds) for traders, it is considerably time-consuming to perform arbitrage calculations on their own.

Traders, therefore, require sophisticated statistical arbitrage trading software that can instantly detect and consequently calculate arbitrage opportunities.

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Top Forex Arbitrage Trading Software Types

Whether you are looking for currency arbitrage trading software or stock arbitrage trading software, many of the Forex arbitrage trading softwares you find will be suitable for many different markets - currencies, stocks, etc.

Traders use FX software programs to identify arbitrage trading opportunities that they may take advantage of for potential profits. We can outline three types of some of the best arbitrage trading software programs that are commonly used within the FX community for arbitrage trading. They are as follows:

Let's look at each of these in detail.

1. Alert Programs for Arbitrage Trading

Just like most automatic Forex arbitrage trading software, this kind of FX software permanently scans various markets, instruments, or brokers for arbitrage trade opportunities.

When this currency arbitrage trading software identifies such an opportunity, rather than conducting the trade automatically, it will alert the trader of the opportunity, who will then decide whether or not to place the trade.

Alerts are notifications that you receive if anything occurs within your FX trading. They are designed both for individual traders, as well as for trade leaders and educators, whose intention is to broadcast important and relevant trade information to their followers.

Traders can produce rule-based alarms that prompt any number of actions.

If we exemplify the 'Alarm Manager', we should outline that this currency arbitrage trading software notifies the trader about important events, and it executes trading actions like placing some new orders, and closing concrete existing positions. In addition, such statistical arbitrage trading software can send updates to followers via:

  • SMS
  • Twitter
  • Email

You can simply choose the notification method you prefer.

Types of Trading Alerts: Account, News, Sentiment and Price

Account Alarms

The available alarms or alerts within Forex and stock arbitrage trading software cover several different areas. The first one is account alarms. Changes in the main account parameters include:

  • Balance
  • Profit and loss
  • Margin
  • Consecutive wins and losses
  • Equity

With such statistical arbitrage trading software alerts, traders can remain aware of changes in these areas.

News or Sentiment Alerts

There are also news or sentiment alerts triggered by calendar events, as well as by material changes in live Forex market sentiment. Traders can track economic announcements via currency and stock arbitrage trading software monitoring events such as:

  • Inflation rate releases
  • Balance of trade figures
  • Unemployment rate figures

Such alerts may also signal other types of economic data that may have an impact on trading by using a Forex Calendar.

Trade Activity Alerts

Additionally, there are so-called 'trade activity alarms', which are a part of currency and stock arbitrage trading software that notify traders about:

  • Newly opened or closed trades
  • Floating profits and losses on one's trades
  • Trades without stop-losses

Price Alerts

Another area is price alerts, which are prompted by changes, levels, or breakouts in price.

Technical Indicator Alerts

There are also tech indicator alerts, which are based on changes in indicators like:

Receiving technical indicator alerts for indicators such as the Bollinger Bands can help traders who are using a range strategy or waiting for a breakout.

Time Alerts

The last one on this list is the time alert. Within the statistical arbitrage trading software you're using, you can set a series of time-based alarms at different intervals. The basic actions that are available upon an alarm being triggered include:

  • Notifications (such as sending or broadcasting SMS, emails, or tweets)
  • Orders (traders can place new FX market or pending orders)
  • Trades (for example, traders can close positions)

By setting such alerts in your statistical arbitrage trading software, you can remain aware of these events to help guide you in making trading decisions.

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2. Remote Alert Program for Arbitrage

There are several traders, who rather than running their own FX software programs, subscribe to what is known as a 'remote alert service'. A subscription to such a service permits them to obtain arbitrage trading opportunity alert signals, in the same way as they would by applying their own software programs.

The distinction here is that the alert signals are supplied by software running at another location, outside of the trader's own network or computer.

In addition, some institutional traders have some advantages over retail traders when it comes to arbitrage trading. For example, some of these advantages include faster sources of news, better equipment, and more advanced Forex arbitrage trading software programs.

Nevertheless, FX arbitrage trading and Forex arbitrage trading software remain popular with many traders.

3. Automatic Trade Software Programs for Forex Arbitrage

Another type of arbitrage forex software utilised in arbitrage trading is automated trading software. This type of arbitrage Forex software is loaded directly onto a trader's brokerage trading platform, such as MetaTrader 4 (MT4), for example.

Whenever the Forex arbitrage trading software indicates an arbitrage opportunity, it will immediately initiate the required trades on the trader's behalf.

Such arbitrage forex softwares of this type are designed to beat one of the primary challenges/tasks of arbitrage trading - the accurate and well-timed trade execution that is necessary for taking advantage of trading opportunities, that only exist for a few seconds.

Forex Automation Arbitrage Trading Software - How it works

Automated FX trading software functions without the constant presence of a trader. This software scans the market for profitable currency trades, utilising pre-set parameters, and parameters programmed into the Forex system by the software user.

As a high level of Forex trading proficiency is not necessary here, all traders have a chance to benefit. You can check whether the particular piece of arbitrage forex software you are considering is suitable by looking for different customers' testimonials or reviews, which will highlight the benefits and drawbacks.

Some programs offer a free trial period alongside other incentives to purchase. In addition, you will find free Forex arbitrage trading software quite easily, but the quality is likely to be debatable. Others may provide a free demonstration model to get the user acquainted with the chosen Forex arbitrage system.

You should also be wary of programs that appear too good to be true. A popular one to look out for is a Forex arbitrage system with large numbers of novice testimonials, who state that they have made huge profits.

There are good forex arbitrage systems and there are bad ones. It's up to you to remain cautious and always look for evidence to back up claims of '95% winning trades'. The publishers who care about the quality of their software will provide users with authenticated trading history results, to show the potency of the software they are selling.

However, remember that past performance does not guarantee the same result in the future. This means that a trader should always be careful and attentive - especially with software labelled "Forex arbitrage software free".

However, traders who are not satisfied with having trades executed automatically, but in turn, prefer to make all final FX trading decisions themselves, can use trade alert software for their Forex arbitrage system instead.

Arbitrage Trade Software for the Indian Stock Market

Are you a trader from India? Then you will be happy to know that all of the software for arbitrage trading that we've discussed here is suitable for online trading, which means you can trade from almost anywhere in the world.

If you're looking for arbitrage trading software for the Indian stock market, then MetaTrader 4 or MetaTrader 5 with the Supreme Edition (SE) plugin will suit your needs.

These platforms are suitable arbitrage trading software for the Indian stock market and any other market that can be traded online.

Sports Arbitrage Trade Software

If you are looking for sports arbitrage trading software to trade sports-related stocks, you are also in the right place.

Just like those looking for arbitrage trading software for the Indian stock market, traders searching for sports arbitrage trading software will be pleased to know that the MT4 and MT5 platforms with the SE plugin will give you access to the sports-related instruments you wish to trade.

These platforms will suit all of the needs of a trader looking for sports arbitrage trading software.

Forex Brokers that Allow Arbitrage Trading

If you are also looking for an arbitrage broker or a Forex broker that allows arbitrage trading, we can say that many brokers don't permit their clients to perform arbitrage trading. This is because many brokers consider it to be a strategy that abuses the market.

Final Words

Choosing Forex software is a very complicated process, and sorting through the vast number of programs the internet has to offer can be extremely time-consuming. That being said, you shouldn't let this discourage you if this is what you want to do.

You may find that the best Forex arbitrage trading software can help you to achieve exactly what you want to do in Forex trading. We hope to have provided you with some useful information so that you know what types of Forex arbitrage trading software are available.

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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.

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