HOW I MADE CRAZY MONEY LEVERAGING CURRENCY ARBITRAGE!

Mind Blowing Opportunities in Currency Arbitrage Trading.

Last week I wrote about crypto currency Arbitrage and I explained the “Kimchi Premium”.

You can go ahead and read about it...check out my articles.

So this is part 2 of my article on Arbitrage and I’ll be limiting this article to currency Arbitrage.

According to Investopedia:

“A currency arbitrage is a forex strategy in which a currency trader takes advantage of different spreads offered by brokers for a particular currency pair by making trades. Different spreads for a currency pair imply disparities between the bid and ask prices. Currency arbitrage involves buying and selling currency pairs from different brokers to take advantage of the mispriced rates”

Understanding Currency Arbitrage

Currency arbitrage involves the exploitation of the differences in quotes rather than movements in the exchange rates of the currencies in the currency pair. Forex traders typically practice two-currency arbitrage, in which the differences between the spreads of two currencies are exploited. Traders can also practice three-currency arbitrage, also known as triangular arbitrage, which is a more complex strategy. Due to the use of computers and high-speed trading systems, large traders often catch differences in currency pair quotes and close the gap quickly.

In this article I will be dwelling on triangular Arbitrage!

What Is Triangular Arbitrage?

Triangular arbitrage is the result of a discrepancy between three foreign currencies that occurs when the currency’s exchange rates do not exactly match up. These opportunities are rare and traders who take advantage of them usually have advanced computer equipment and/or programs to automate the process but I’ll simplify it in such a way that you can replicate their result using your smart mobile phone.

A trader employing triangular arbitrage, for example, would exchange an amount at one rate (Kenyan shillings KSH), convert it again (Dollar USD), and then convert it finally back to the original (Nigerian Naira NGN), and assuming low transaction costs, net a profit.

Understanding Triangular Arbitrage

This type of arbitrage can result in a "riskless" profit if quoted currency exchange rates do not equal the market's cross-exchange rate. In other words, if two currencies also trade against some third currency, then the exchange rates of all three should be synchronized, otherwise, a profit opportunity exists.

International banks, who make markets in currencies, exploit an inefficiency in the market where one market is overvalued and another is undervalued. Price differences between exchange rates are only fractions of a cent, and in order for this form of arbitrage to be profitable, a trader must trade a large amount of capital. But then wide spreads exist in the African currency market and that is the basis of this article. I have personally seen spreads of 20–50 NGN per dollar in transactions. These seemingly high spreads are mostly due to the irregularities and instability of the African economy and currency market.

A TYPICAL PERSONALISED EXAMPLE OF A CURRENCY ARBITRAGE I WAS INVOLVED IN SOME WEEKS AGO.

Now this Arbitrage no longer exist but I’ll be explaining it for learning/educational purpose only.

So few weeks ago I was looking for a way to source my dollar for cheap using the NGN. I saw many options around Africa. I saw that I could convert the Nigerian Naira to Kenyan shillings (KSH), Ugandan shillings (UGX), Rwandan Franc (RWF) e.t.c and buy the dollar (USD) at a cheaper rate. I was very excited on discovering this but then there were some limitations.

I needed to find a way to convert from naira to any of these currencies. Most of these African countries have their financial system spear headed by Fintechs (mobile money institutions) so having a bank account demands travelling to these countries and getting a sim card or having someone mail you the sim card. Getting an account with a traditional financial institution in the country is almost impossible.

The second challenge was converting from the local currency (KSh, UGX, RWF…etc) to the USD.

The third challenge was converting from the USD back to the Nigerian Naira (NGN).

The final challenge is scaling it and automating it (almost impossible🧐).

This is where the research begins🙃

So I started researching and in the course of my research I found an app that could help me convert my Ngn to KSh, AFRIEX.

How did I find Afriex?

I was trading on binance p2p market and one day I intentionally started downloading and checking the currency exchange rate on each of the payment systems/methods available on the platform. This was how I saw that I could buy KSh for cheap using this app.

KSh was trading at 115ksh/$ and Ngn was trading at 570/$ on the binance p2p platform. But on the Afriex app, Ngn/KSh was trading at 537Ngn/115KSh (537ngn/$…I omitted the rigorous calculations). This is my solution. I was overly excited but then how do I sell this KSh??😚😚😚😭

All thanks to the binance p2p platform. They served as a strong escrow between myself and the Kenyan p2p market. So I started selling my cheaply sourced KSh for tokenised dollar (USDT) at 120ksh/$, adding extra 5 ksh to the normal market price (115ksh/$) so I could sell fast. Almost #40/$ spread as profit😀

I sold my ksh for USDT on the binance Kenyan p2p market and sold my Usdt for Ngn on the binance Nigeria p2p market.

Did I talk about the sleepless nights of research??🤦🤦

Now I have a solution but how do I scale it??

Afriex has a limit of $3000 daily and there was no option for a business account so I knew the only way I could scale it was to have multiple apps. So I did another research and I got to know about the app cloner. It’s free but there are paid versions. The app cloner allows you to have multiple apps in your phone….You Gerrit??😀

So that was how I scaled it.

Since then I have discovered so many arbitrage opportunities in the African currency market and I have leveraged them to make some cool $$.

One thing about these Arbitrage opportunities is that they tend to disappear when alot of people start using them🤐

I think I’ll have a part 3 where I will talk about the current Arbitrage opportunity I’m enjoying or should I charge a fee to share it exclusively to a few persons willing to pay my fee??🤔🤔

So this is the end of my story for today.

Ask your questions in the comments and you can chat me on Whatsapp (+2347031514193). My advice is not free😊

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Thank you.