What are the specific principles and specific operating procedures of foreign exchange arbitrage trading?

The arbitrage trade that is currently popular in the market is actually an arbitrage trade in nature. Arbitrage refers to using the difference in savings interest rates between foreign currencies to earn higher interest income. It mainly buys high-interest-rate currencies and sells low-interest-rate currencies to earn overnight interest. The currencies used for buying are mainly Australian dollars and New Zealand dollars among high-interest-rate currencies, while the main currencies used for selling are low-interest-rate Japanese yen. and US dollars. Due to the existence of platform leverage, for a standard contract of 100,000 U.S. dollars, the large NED/JPY spread may be more than 10 U.S. dollars a day, and even 40 U.S. dollars on Wednesday. However, the overnight interest rates for foreign exchange transactions on different platforms are inconsistent. This is determined by funds. Since the interest rate difference exists objectively, the platform will not bear this part of the cost for customers, so the wool comes from the sheep. Secondly, the maximum amount is 15 US dollars a day. The interest rate difference may just be a point difference in the foreign exchange market. It is normal for the exchange rate to fluctuate 100 points a day. Sometimes prices of 300 to 500 points will also appear. If you go against the trend by 200 points, then one contract The loss may be only 2,000 US dollars. Compared with the fixed income of 15 US dollars you get, it may be a matter of picking sesame seeds and losing watermelon, and the gain outweighs the loss.

So what is the real foreign exchange arbitrage in the market? Most of the real foreign exchange arbitrage is done by banks, which requires high professional knowledge and capital amount. Mainly using swap method. Swaps refer to buying spot foreign exchange and selling forward foreign exchange of the same currency in the foreign exchange market, or selling spot foreign exchange and buying forward foreign exchange of the same currency at the same time. A spot business and a forward business are combined in one transaction, or lending business is combined in one business. In a market with highly developed informatization, any arbitrage space will be identified by the bank's high-frequency trading system within a few milliseconds. In the remaining few milliseconds due to the transaction of arbitrage funds, the arbitrage space is further compressed and the market price returns to normal. .

There is also a Chinese-style arbitrage method currently on the market. Let’s call it arbitrage. The main principle is to operate using the divergence value of two varieties. For example, crude oil, because the global crude oil market is relatively large, there will also be many crude oil quotation centers, mainly Brent crude oil and U.S. crude oil. The quotation difference between the two is usually within 2 US dollars, one is long and the other is short. Use reasonable position management to conduct transactions and grasp peak statistics. Of course, this trading model will also have certain risks, but with certain risk control, there will be some profits worthy of investors.