Basic Forex Arbitrage - Very Nice

[LogicRules]

One of the most profitable strategies I've seen goes like this:

Current GBPJPY minus "Center" GBPJPY says, "What would the GBPJPY profit/loss have been if I had bought GBPJPY at the Center GBPJPY exchange rate?"

"Center" EURCHF - Current EURCHF says, "What would the EURCHF profit/loss have been if I had sold EURCHF at the Center EURCHF exchange rate?"

The sum of the two results is what we call our shadow profit (tip of the hat to Forex Assistant and associates).

If the shadow profit is negative, we buy GBPJPY and sell EURCHF. If the shadow profit is positive, we sell GBPJPY and buy EURCHF.

The positive or negative levels to enter are values like 75, 150, 250. The market appears to VIRTUALLY ALWAYS swing toward the other side, where the shadow profit is positive or negative, opposite of what it was before.

One big key is having reliable "Center" values for the two currency pairs. It appears that taking an SMA of 60 four-hour bars' highs and lows works pretty well. The shadow profit (deviations) represent trade entry opportunities.

Profits can be taken as the trader sees fit.

[socrates]

say what?

LR, I've been doing this a while, but this has me stumped. Please explain without shadows and perhaps an example

Cheers

Soc

[LogicRules]

socrates,

Forex Assistant covers this stuff very thoroughly. Google them and visit their web site. The explanations and illustrations are very clear. Good luck.