i have research of this kind of tradingHonestly, I can't find a real reason why some brokers prohibit this kind of trading, other than they trade against their clients.
This strategy is misunderstood by many traders worldwide.
It's a kind of hedging by some traders doing so while others trade it by simply taking advantage of the gaps left.
For example: When EurUsd and GbpUsd are positively correlated, i mean both mostly go up and down together.
What experienced traders do is the following: They wait till one of both pairs price stay in its place while the other rally up or down, to take advantage of this opportunity by buying or selling the not rallied pair as it will follow the other sooner or later. They also keep a close look at eurgbp pair for tips or they trade it specifically with the other 2 pairs monitoring.
Arbitrage is one of the most misunderstood and most abused words.
There are TONS of sites that will sell you an arbitrage strategy or an arbitrage robot.
Fx brokers prohibit "arbitrage". They are really prohibiting trades due to lagging or incorrect prices. (And bad brokers just use it as an excuse to cancel trades solely because those trades made a profit.)
True arbitrage is buying from one place at a low price when you know you can quickly resell at a higher price. For example, back when gold and silver coins were common currency, the gold/silver exchange rate varied from place to place. In some places, a gold coin was worth 10 silver coins (of the same weight), in others, the exchange rate was 12. If you regularly traveled between these areas, you could make a sure profit by using 100 silver coins to buy 10 gold coins and then later sell those 10 gold coins for 120 silver coins - assuming, of course, expenses and the chances of being robbed didn't exceed your 20 silver coin profit margin.
In modern times, imagine if you knew some shop had an 50% sale on a popular item and you also knew you could easily resell the items for 90% of retail on eBay.
Price differences between markets (forex and currency on the futures markets) can sometimes create a perfectly legal arbitrage opportunity. The problem is that opportunities like this aren't exactly secrets, so unless you are trading large volumes and get lucky enough to spot the chance early, you won't be able to make huge piles of money this way.
Honestly, I can't find a real reason why some brokers prohibit this kind of trading, other than they trade against their clients.
This strategy is misunderstood by many traders worldwide.
It's a kind of hedging by some traders doing so while others trade it by simply taking advantage of the gaps left.
For example: When EurUsd and GbpUsd are positively correlated, i mean both mostly go up and down together.
What experienced traders do is the following: They wait till one of both pairs price stay in its place while the other rally up or down, to take advantage of this opportunity by buying or selling the not rallied pair as it will follow the other sooner or later. They also keep a close look at eurgbp pair for tips or they trade it specifically with the other 2 pairs monitoring.
triangular arbitrage is like a myth for retail forex traders like usFrom my understanding, this is not the type of arbitrage in your example. Arbitrage to me is more near to what Pharaoh explain. You can only profit if you have the fastest feed and actually there are no risk at all if an arbitrage position running.
In your example, you do have risk as you "assume" they are highly correlated and will follow sooner or later. But don't forget that although EURUSD and GBPUSD are highly correlated 80% of the time, but still they might go their own way. They will move together only if the actual strength or weakness is on dollar. There are couple type of arbitrage as well and from my knowledge and what I am more experience in was Latency Arbitrage which I used on Chinese market, still this type of arbitrage with low risk. There is also one called Triangular Arbitrage but not really familiar with it.