Triangular Arbitrage 101 in the forex market. This article discusses the basics of triangular arbitrage using an example to show how to spot the inefficiency in a three currency pair hedge. Additional concepts are explored such as how to create a synthetic pair, how to mean center the triad around zero and how to determine which currency pair is out of line the most when three pairs are being analysed, and possible interpretations of this inefficiency. Triangular arbitrage should be studied by anyone who trades forex because possible edge-based strategies can be created using tri arb as a starting point.
Triangular Arbitrage Lot Size - How do you size your triangular arbitrage ring to fully hedge your currency exposure?
Triangular Arbitrage with Bid Ask Quotes - How do you calculate the triangular arbitrage formula with bid and ask quotes?