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Triangular Arbitrage - In 100 words or less

Triangular Arbitrage is a situation that arises when exchange rates do not exactly match up - Exchange Rate Discrepancies.


Say you had k1 units of currency A.

 

When converted to currency B, k1 becomes k2.


When converted to currency C, k2 becomes k3.


Ordinarily, when we convert k3 to currency A, we get k1 back. 

But, in this condition, we would get more than k1!


As cool as this sounds, for an average person, it is hopelessly impractical because these are few and far between. Furthermore, Low profits require large trades done very quickly - a job for automation software.

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