A clear arbitrage exists between mainstream currency trading brokers and spread betting forex brokers. The arbitrage situation exists because with spread betting you have the option to have your pips priced in different currencies. For example you could have a long gbp/usd position so that the pips are priced at £5 per point. To hedge we could use a short GBP/USD position with a normal forex broker, using 1 standard lot.
We will assume the starting price is $2.
If price moved up to $2.20. The short position would be $-20,000. The long would be £10,000. The net profit would be the £10,000 - $20,000 (£9090). A net profit of £910.
If price moved down to $1.80. The short position would be $20,000. The short would be £10,000. So profit would be $20,000 (£11,111) - £10,000, which would be a profit of £1,111.
So no matter which way price moves, the arbitrage situation works. The reason it works is because of the conversion from dollars back to sterling is at different rates to due to price movement. In theory this is a risk free forex trading system. This may seem like an advanced forex trading system, but once you master the understanding of it, it’s really quite easy. Out of all the online forex trading systems, this could actually be the lowest risk!
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