Games that combine chance and skill appeal to us on every level. On the one hand, we all like the idea that we can be lucky, and the very concept of wanting to “try our luck” is something that appeals on a fundamental level. If that wasn’t the case, games like roulette or craps would not exist.
But what is even better is if we can bend the forces of outrageous fortune to our will. We discussed it a few weeks ago when we talked about grooming yourself for blackjack stardom, and how some relatively simple strategies can make a big difference to your success rate – a clever thing to know when you’re playing a game that is dictated by the turn of a card.
The five trillion dollar a day trading game
Imagine a game where, like blackjack, your success is contingent on a blend of luck and skill. However in this game, the rules and strategies are far more complex, allowing you to influence the outcome to a greater extent than any blackjack strategy could achieve. What’s more, it’s such a popular game that millions are involved, staking as much as five trillion dollars every day.
It might sound like something from the world of fantasy, but what we’ve just described is actually the global currency market. Fancy sitting down and playing a hand or two? Then we’d better go through some strategy tips.
You reap what you sow
If you’ve spent any time playing World of Warcraft (and if not, why not?) you will know that you have to put in the hard yards to get anywhere. The developers have worked hard to make the game accessible and draw you in, but to really become a master requires dedication, research and hours spent scouring the internet for hints and tips.
That’s fine, and it’s what gaming is all about. But it’s not until you apply the same principles to Forex trading that you begin to see that you could be expending all that effort in something equally challenging, but that can bring tangible financial benefits as a reward for all your hard work. Think about those numbers again. Millions of people. Trillions of dollars. One giant global marketplace. It’s got to be worth a look.
What about killer strategies?
Every game has certain strategies that will help you along the road to success to a greater or lesser extent, whether it’s blackjack, World of Warcraft, or chess. But of course, none of them provide a guaranteed path to the winner’s podium, and it would be too much to expect any different from Forex trading strategies. Or would it? There are those who have mastered the art of how to use arbitrage in Forex and claim that it is a risk-free way to beat the system. Too good to be true? Let’s find out more.
Arbitrage takes advantage of inefficiencies in the very systems on which the forex markets are built to make money, and in theory, the “risk free” label is accurate. Of course there’s a catch – if there wasn’t we’d have all made our millions and the guys and girls at Maranello would not be able to churn out Ferraris fast enough. The problem with arbitrage is that putting it into practice requires lightning reactions and perfect timing. It’s much like a nine dart finish or a hole in one – all very well in theory but something that only the best can execute consistently.
What is arbitrage?
The easiest way to describe how it works is by way of an example. Suppose the current exchange rates for the Euro, Dollar and Pound currency pairs are as follows:
- EUR/USD: 1.18
- EUR/GBP: 0.72
- GBP/USD: 1.64
This means a trader could buy €10,000 for $11,800. He could then sell his Euros for £7,200. Then he could convert those pounds into US dollars. Pull out your calculator, and you’ll see that he has $11,808. In other words, he’s magically created eight bucks out of nothing.
Sometimes the yield is a little more and sometimes a little less. In theory, you could go through the above process with a million dollars and generate over $700 out of thin air – not a bad morning’s work by any standards. The problem is, however, that you are constantly working against a door that is swinging shut. That is to say that the very act of exploiting the flaw in the system causes the gap to close.
Arbitrage is an intriguing aspect of Forex trading, and is one that will appeal particularly to the geeks and gamers out there. The possibility of generating even a few dollars out of nothing is something that nobody can object to, so why not give it a go? After all, you’ve nothing to lose.