Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume”.

Please refer to the table below for more details:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.

Dear Client,

New contracts will automatically be rolled over as follows:

Please note:
• The rollover will be automatic, and any existing open positions will remain open.
• Positions that are open on the expiration date will be adjusted via a rollover charge or credit to reflect the price difference between the expiring and new contracts.
• To avoid CFD rollovers, clients can choose to close any open CFD positions prior to the expiration date.
• Please ensure that all take-profit and stop-loss settings are adjusted before the rollover occurs.
• All internal transfers for accounts under the same name will be prohibited during the first and last 30 minutes of the trading hours on the rollover dates.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.

Markets remain cautious as the US ramps up trade tensions, with fresh tariffs and tough rhetoric driving sharp moves across currencies and commodities. The developments underscore how political shifts continue to influence global market dynamics and investor sentiment.

US dollar firms

The US dollar remains on a firm footing, trading at 97.241 at the time of writing, after touching an intraday high of 97.356.

The broader USD Index (USDX) rose to 97.602—its highest level since 25 June—driven by renewed trade tensions and strong language from President Trump regarding tariffs.

The most significant market mover came overnight, when Trump imposed a 50% tariff on copper imports. This announcement sparked a sharp 10% surge in US copper futures.

Copper, which plays a crucial role in electric vehicles, energy infrastructure, and military production, was already facing global supply constraints—adding further pressure to the market.

Meanwhile, copper prices dropped in London and Shanghai, as traders braced for potential disruptions in the supply chain and rushed shipments to the US ahead of the new tariff implementation.

The policy shift highlights how Trump’s evolving trade stance continues to impact both commodity markets and currency valuations globally.

Pharmaceuticals and semiconductors in the crosshairs

President Trump also signalled forthcoming tariffs on pharmaceutical goods and semiconductors—industries heavily reliant on East Asian exporters, particularly Japan and South Korea.

Both countries have been given a deadline of 1 August to negotiate separate trade deals or face substantial tariff increases.

On Monday, Trump referred to the deadline as “firm, but not 100% firm,” but reversed his tone on Tuesday, stating unequivocally that “no extensions will be granted.”

This hardline position rattled global markets, sending US futures slightly lower by 0.1%, while the S&P 500 spot index extended earlier losses, down 0.8% for the week.

Technical analysis: USDX at a turning point

From a technical standpoint, the US Dollar Index remains in a short-term consolidation phase, just below key resistance around 97.47, after rebounding from earlier lows near 96.79.

The price action is currently hovering around the 30-period moving average, having briefly gained momentum following a solid US jobs report (~147,000 jobs added), which temporarily boosted bullish sentiment.

Picture: Dollar finds footing above 97.20 as bulls eye breakout zone, as seen on the VT Markets app.

However, the upward move has since lost steam. The MACD histogram has flattened, and the short-term moving averages (5, 10, and 30 periods) are converging—indicating a potential slowdown in bullish momentum.

For upward continuation, a decisive break above the 97.40–97.47 range is critical.

A breakout here could set the stage for a test of 97.70, with 98.00 as the next resistance, assuming no significant macroeconomic headwinds emerge.

On the downside, a drop below key support around 97.15–97.20—which has been tested several times today—could increase the risk of a pullback toward 96.80, and potentially down to 96.50 if selling pressure persists.

Click here to open account and start trading.

Master the Mean Reversion Strategy: Your Guide to Profitable Trading

The mean reversion strategy is a popular trading approach that focuses on the tendency of asset prices to revert to their historical average over time. This strategy can be effectively applied across various markets, including forex, stocks, and commodities. In this guide, we’ll explore the key indicators for identifying mean reversion opportunities, along with its benefits and risks.

What is Mean Reversion?

Mean reversion is a concept used in financial markets that suggests asset prices tend to revert to their historical average over time. This theory is based on the idea that if an asset’s price moves significantly away from its long-term mean, it will eventually return to that mean. For example, if a stock has been trading above its historical average for an extended period, it may be expected to fall back to its mean, and vice versa.

This strategy can be applied across various asset classes, such as stocks, forex, commodities, and indices. Traders use the mean reversion strategy to capitalize on price fluctuations by predicting that overextended moves will eventually reverse.

Key Indicators for Mean Reversion Strategies

Successful mean reversion traders rely on several technical indicators to identify when prices are likely to revert to the mean. These indicators help traders spot overbought or oversold conditions and anticipate price corrections. Some of the most common indicators include:

1. Moving Averages

Both simple moving averages (SMA) and exponential moving averages (EMA) are used to track the historical average of an asset’s price. If the current price significantly deviates from the moving average, it could indicate a potential reversion.

2. Bollinger Bands

Bollinger Bands consist of a moving average and two standard deviation bands. When the price touches or exceeds the upper or lower band, it may signal that the asset is overbought or oversold, respectively, making it a prime candidate for a reversion.

3. Relative Strength Index (RSI)

The RSI measures the speed and change of price movements, helping traders determine if an asset is overbought (above 70) or oversold (below 30). This indicator is especially useful for spotting potential reversals in price trends.

These indicators, used in combination, help traders identify mean reversion opportunities, increasing the accuracy of their predictions.

How Does the Mean Reversion Strategy Work?

The mean reversion strategy works by identifying when the price of an asset is deviating too far from its historical average, creating an opportunity for traders to profit from the expected price correction. Here’s a simple breakdown of how the strategy works:

• Identify Overbought/Oversold Conditions: Using indicators like Bollinger Bands or RSI, traders can determine when an asset has moved too far away from its mean. For example, if a stock has been rallying and the RSI exceeds 70, it may be overbought and due for a correction.
• Enter the Trade: Once an asset is identified as overbought or oversold, traders initiate a buy or sell order, depending on the direction of the reversion. For instance, if an asset is oversold, a trader would enter a buy order, anticipating the price will rise to its historical mean.
• Exit the Trade: The trader exits the position when the asset’s price returns to the mean or when the market shows signs of stabilizing.

Benefits of the Mean Reversion Strategy

The mean reversion strategy offers several advantages that make it a popular choice among traders:

• Consistent Profit Potential: Traders can identify consistent opportunities to capitalize on price corrections when an asset moves too far from its mean, especially in range-bound markets.
• Lower Risk in Sideways Markets: The strategy performs best in flat or sideways markets, where price fluctuations are typically smaller. This makes it less risky compared to trend-following strategies in volatile conditions.
• Predictable Outcomes: Because prices tend to revert to their historical average, the strategy offers a predictable framework for traders, allowing them to make decisions based on historical patterns.
• Effective in Stable Markets: The mean reversion strategy can generate reliable returns in stable markets where price movements fluctuate around a defined mean, reducing uncertainty for traders.
• Flexibility Across Asset Classes: This strategy can be applied across various asset classes like stocks, forex, and commodities, making it versatile for traders in different markets.

Risks and Limitations of the Mean Reversion Strategy

While the mean reversion strategy has its advantages, there are also risks and limitations to be aware of:

• Trends Can Override Reversions: In trending markets, prices may continue to move away from the mean, making it difficult for the mean reversion strategy to work. Strong trends can overpower short-term price corrections.
• Market Volatility: In highly volatile markets, prices may experience extreme swings that do not revert to the mean, leading to larger-than-expected losses if the trend continues in the wrong direction.
• Overestimating the Mean: The historical average may no longer be a reliable reference point, especially if external market factors or changes in the economic environment shift the mean over time.
• False Signals in High Volatility: During periods of high volatility, indicators like Bollinger Bands or RSI may produce false signals, leading traders to enter positions based on market noise rather than a true mean reversion opportunity.
• Short-Term vs. Long-Term Reversion: Mean reversion can be a long-term strategy, but if the market doesn’t revert to the mean within a trader’s desired timeframe, they might face unexpected drawdowns before the price correction occurs.

Popular Mean Reversion Strategies

Several mean reversion strategies have become widely used among traders. Some of the most popular include:

1. Pairs Trading

Pairs trading involves identifying two correlated assets (e.g., two stocks or currency pairs) that typically move in sync. When the price of one asset deviates significantly from its mean relative to the other, traders take a long position on the undervalued asset and a short position on the overvalued one, betting that their prices will converge back to historical levels.

Example: Imagine you’re trading major currency pairs like EUR/USD and GBP/USD, which are historically correlated pairs. If the EUR/USD pair rises significantly while the GBP/USD remains stable, you might go long on GBP/USD (betting it will rise) and short on EUR/USD (anticipating a price drop), expecting the price gap between the two to close.

Learn the differences between a long position and a short position. 

2. Bollinger Band Reversals

Bollinger Bands are a tool that measures the volatility of an asset. The bands consist of a moving average and two standard deviation lines. When an asset’s price touches or exceeds the upper or lower band, it suggests that the asset is overbought (upper band) or oversold (lower band). The assumption is that the price will eventually revert to the moving average.

Example: Let’s say you’re trading EUR/USD and the price hits the upper Bollinger Band. This could signal that the currency pair is overbought, and you might decide to sell the pair, expecting the price to revert back down toward the moving average. Conversely, if the price touches the lower Bollinger Band, you might buy, betting that the price will bounce back up.

Discover the 8 most traded currency pairs in the world.

3. Contrarian Trading

Contrarian traders go against prevailing market sentiment, betting that market overreactions will eventually correct. For instance, in a market where everyone is overly optimistic, a contrarian might take a short position, expecting that prices are inflated and will revert to more reasonable levels.

Example: Imagine stock XYZ has been rallying for weeks, and market sentiment is overly bullish. If a contrarian believes the price has become overextended, they might decide to short the stock, anticipating that the price will soon correct as the optimism fades and reality sets in.

Applying Mean Reversion Strategy in Different Markets

The mean reversion strategy can be applied across various markets, but its effectiveness may vary depending on the type of market conditions and asset class. Understanding how this strategy behaves in different markets is crucial for traders.

1. Forex Market

In the forex market, mean reversion works well with currency pairs that exhibit stable volatility. For instance, EUR/USD and GBP/USD tend to oscillate around certain levels, making them ideal candidates for mean reversion trades. 

Example: If EUR/USD rises significantly above its 50-day moving average, a trader may anticipate a price correction back toward the average, entering a short position when the price starts to move back downward after touching the upper limit.

Discover the 9 best forex trading strategies you should know. 

2. Stock Market

Stocks often experience mean reversion after earnings reports or significant news, where stock prices initially overreact and then return to their historical averages. Traders often use moving averages and RSI to spot when stocks are overbought or oversold and capitalize on the price correction. 

Example: After a Tesla (TSLA) earnings report, the stock price may jump to an unsustainable high. A trader might use the RSI to confirm the stock is overbought and take a short position, expecting the price to revert to its average post-report.

3. Commodities Market

Commodities like gold or oil can show mean reversion during periods of fluctuating demand and supply. Prices may diverge from the mean due to geopolitical events or natural disasters, and once the market stabilizes, prices typically revert to the average. 

Example: After a sharp drop in crude oil prices following a supply shock, a trader could look for signs of stabilization in the market and enter a long position, anticipating that oil prices will revert to a more typical level as the supply situation normalizes.

Discover the key differences between WTI and Brent crude oil. 

4. Cryptocurrency Market

The crypto market is known for its extreme volatility. While mean reversion can work in this market, it requires extra caution. Cryptocurrencies often experience exaggerated price movements due to market sentiment, regulatory news, or speculative trading. 

Example: After a significant dip in Bitcoin (BTC) due to negative news, a trader might use Bollinger Bands to identify when Bitcoin becomes oversold. If it touches the lower band, they may enter a long position, betting on a price reversion to its mean once the market stabilizes.

In Summary

The mean reversion strategy is a popular trading approach that capitalizes on price corrections when an asset moves too far from its historical average. By using key technical indicators such as moving averages, Bollinger Bands, and RSI, traders can identify opportunities for price reversals. While this strategy offers consistent profit potential, it does have risks, especially during trending markets or periods of high volatility. It’s crucial for traders to manage risk effectively and adapt their strategies to current market conditions.

Turn Your Knowledge into Practice with VT Markets Today

At VT Markets, we offer a range of tools and platforms to help you implement the mean reversion strategy successfully. Whether you’re a beginner or an experienced trader, our educational resources, including advanced charting tools, real-time market data, and access to MetaTrader 4 (MT4) and MetaTrader 5 (MT5), can help you take your trading to the next level. 

With competitive spreads and the ability to practice strategies risk-free through the VT Markets demo account, we provide everything you need to get started. If you have any questions or need assistance, our Help Centre is always available to support you. 

Start trading with VT Markets today and put your mean reversion strategy knowledge into practice.

Frequently Asked Questions (FAQs)

1. What is mean reversion?

Mean reversion is the concept that asset prices tend to move back toward their historical average or mean over time. When the price of an asset deviates significantly from its average, it is expected to return to that mean, creating opportunities for traders to profit from price corrections.

2. What is the best indicator for mean reversion?

The best indicators for mean reversion include Bollinger Bands, RSI, and moving averages. These tools help traders identify overbought or oversold conditions, signaling potential reversals.

3. Can mean reversion work in trending markets?

Mean reversion works best in sideways markets or range-bound conditions. In trending markets, it may fail because prices often do not revert to the mean.

4. How can I manage risk in mean reversion trading?

Risk can be managed using stop-loss orders and position sizing. It’s essential to set clear exit points and avoid chasing trends that could lead to significant losses.

5. What market conditions are best for mean reversion strategies?

Mean reversion works best in range-bound or sideways markets, where prices fluctuate around a specific average. It’s less effective in strong trending markets.

6. How do I identify overbought or oversold conditions for mean reversion?

RSI above 70 indicates overbought, while below 30 indicates oversold. Bollinger Bands can also help, with price touching the upper band suggesting overbought, and the lower band indicating oversold.

7. How do I set the target for a mean reversion trade?

Targets are usually set at the asset’s historical mean or moving average. Traders exit once the price reverts back to this level.

8. What is the role of volatility in mean reversion trading?

High volatility can lead to larger deviations from the mean, creating more opportunities for reversions. However, it also increases risk, so careful risk management is key.

9. Can I use mean reversion in conjunction with other trading strategies?

Yes, mean reversion can be combined with trading strategies like momentum trading or support and resistance to improve entry and exit points.

Starting your forex trading journey can seem overwhelming, but with the right approach and knowledge, you can navigate this $6+ trillion daily market successfully. At VT Markets, we believe how to start trading forex for beginners begins with understanding the fundamentals and taking systematic steps toward becoming a skilled trader.

Key Takeaways

• Choose a regulated broker and start with a demo account to practice risk-free
• Learn essential forex concepts like currency pairs, spreads, and leverage
• Develop a solid trading plan with clear risk management strategies
• Start with major currency pairs like EUR/USD for stability
• Never risk more than you can afford to lose

Understanding the forex market fundamentals

The forex market operates as the world’s largest financial market, where currencies are traded 24 hours a day, five days a week. Unlike stock markets, forex trading doesn’t have a centralized exchange – instead, it operates through an over-the-counter (OTC) network of banks, brokers, and traders worldwide.

Currency trading involves buying one currency while simultaneously selling another. These are traded in pairs, such as EUR/USD (Euro against US Dollar) or GBP/JPY (British Pound against Japanese Yen). The first currency in the pair is called the base currency, while the second is the quote currency.

Major currency pairs include the most liquid and frequently traded combinations: EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD, USD/CAD, and NZD/USD. These pairs typically offer tighter spreads and more predictable price movements, making them ideal for beginners.

Choosing the right forex broker

Essential broker criteria

Selecting a reputable broker is crucial for your trading success. At VT Markets, we recommend evaluating brokers based on these key factors:

Regulation and security should be your top priority. Ensure your chosen broker is regulated by recognized authorities like the FCA, ASIC, or CySEC. This provides protection for your funds and ensures fair trading practices.

Trading costs significantly impact your profitability. Look for competitive spreads, low commissions, and transparent fee structures. Some brokers offer commission-free trading but wider spreads, while others charge commissions with tighter spreads.

Trading platform quality affects your daily trading experience. Popular platforms like MetaTrader 4 (MT4) and MetaTrader 5 (MT5) offer advanced charting tools, technical indicators, and automated trading capabilities.

Account types and minimum deposits

Most brokers offer various account types to suit different trading styles and capital levels. Micro accounts allow you to trade smaller position sizes (0.01 lots), making them perfect for beginners. Standard accounts typically require higher minimum deposits but offer better trading conditions.

Many brokers now allow you to start with as little as 100, though we recommend starting with at least $500 – $1,000 to give yourself adequate room for proper risk management.

Getting started with demo trading

Benefits of demo accounts

Demo trading is an essential first step that allows you to practice with virtual money in real market conditions. This risk-free environment lets you:

• Familiarize yourself with the trading platform
• Test different trading strategies
• Understand market movements without financial risk
• Develop emotional discipline

Making the most of your demo experience

Treat your demo account seriously, as if you’re trading real money. Set realistic position sizes that match what you’d use with actual capital. Practice for at least 2-3 months before considering live trading.

Focus on developing consistent profitability rather than chasing big wins. If you can’t make money consistently in demo trading, you’re not ready for live markets.

Learning essential forex concepts

Currency pairs and market analysis

Understanding how to read currency pairs is fundamental to forex trading. In EUR/USD = 1.2000, this means one Euro equals 1.20 US Dollars. If you believe the Euro will strengthen against the Dollar, you’d buy EUR/USD (go long). If you think it will weaken, you’d sell EUR/USD (go short).

Technical analysis involves studying price charts and patterns to predict future movements. Key indicators include moving averages, RSI, MACD, and support/resistance levels. Fundamental analysis focuses on economic factors like interest rates, GDP growth, and geopolitical events.

Risk management strategies

Position sizing is crucial for long-term success. Never risk more than 1-2% of your account balance on a single trade. If you have a 1,000account, your maximum risk per trade should be 10-20.

Stop-loss orders automatically close your position when it reaches a predetermined loss level. This prevents small losses from becoming account-destroying disasters. Always set stop-losses before entering trades.

Take-profit orders secure your gains by automatically closing profitable positions at target levels. This removes emotion from profit-taking decisions and helps maintain discipline.

Developing your trading strategy

Popular beginner strategies

Day trading involves opening and closing positions within the same trading day. This strategy requires constant market monitoring and quick decision-making. While potentially profitable, it can be stressful for beginners.

Swing trading holds positions for several days to weeks, capturing medium-term price movements. This approach requires less time commitment and allows for more thorough analysis.

Position trading involves holding trades for weeks or months, focusing on long-term trends. This strategy suits beginners who prefer less frequent trading and can handle overnight position risks.

Building your trading plan

A comprehensive trading plan should include:

• Your trading goals and risk tolerance
• Preferred currency pairs and timeframes
• Entry and exit criteria
• Risk management rules
• Trading schedule and routine

Document your plan in writing and stick to it consistently. Emotional trading decisions often lead to losses, while systematic approaches tend to be more profitable over time.

Common beginner mistakes to avoid when starting to trade Forex

Overleveraging is the fastest way to lose money in forex. While brokers may offer leverage up to 500:1, beginners should start with much lower ratios (10:1 or 20:1) until they gain experience.

Lack of education leads to poor decision-making. Invest time in learning about market fundamentals, technical analysis, and risk management before risking real money.

Emotional trading causes traders to deviate from their plans. Fear and greed are your biggest enemies in forex trading. Stick to your predetermined strategy regardless of short-term results.

No risk management is perhaps the most dangerous mistake. Always use stop-losses, proper position sizing, and never risk more than you can afford to lose.

Frequently Asked Questions

Is forex trading profitable for beginners?

Forex trading can be profitable, but it requires education, practice, and discipline. Most beginners lose money initially, which is why demo trading and proper education are crucial.

What’s the best currency pair for beginners?

EUR/USD is often recommended for beginners due to its stability, tight spreads, and predictable behavior. It’s the most liquid currency pair in the world.

How long does it take to learn forex trading?

Basic concepts can be learned in a few weeks, but developing profitable trading skills typically takes 6-12 months of consistent practice and study.

Can I trade forex part-time?

Yes, forex trading can be done part-time due to its 24-hour nature. Swing trading and position trading are particularly suitable for part-time traders.

Final Thought on Trading Forex For Beginners

Starting your forex trading journey requires patience, education, and careful planning. At VT Markets, we’ve seen countless beginners succeed by following these fundamental principles: choosing a regulated broker, mastering the basics through demo trading, developing a solid trading plan, and maintaining strict risk management.

Remember that how to start trading forex for beginners isn’t just about making your first trade – it’s about building sustainable skills for long-term success. Take time to educate yourself, practice consistently, and never risk more than you can afford to lose.

Ready to begin your forex trading journey? Open a demo account with VT Markets today and start practicing with our comprehensive educational resources and professional trading platforms. Your path to forex trading success starts with that first step.

Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume”.

Please refer to the table below for more details:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.

Arbitrage Trading: What Is It and How to Profit from Market Inefficiencies

Arbitrage is a powerful concept in trading, where traders take advantage of price differences in different markets or asset classes to make a profit. In this article, we will explore what arbitrage in trading means, the types of arbitrage, factors affecting profitability, the risks involved, and how you can get started with arbitrage trading.

Arbitrage Meaning: What Is Arbitrage?

Arbitrage refers to the practice of exploiting price discrepancies for the same asset across different markets. It involves simultaneously buying and selling an asset to profit from differences in its price. These opportunities arise due to inefficiencies in the market, timing, or liquidity, and are typically short-lived. The concept of arbitrage is central to trading, as it helps to bring prices in different markets into alignment, promoting market efficiency.

Example: If an asset is being sold at $100 in one exchange and $105 in another, a trader can buy the asset at the lower price and sell it at the higher price, pocketing the $5 difference as profit.

What Is Arbitrage in Trading?

In trading, arbitrage involves taking advantage of price discrepancies for the same asset across different markets or exchanges. These differences in prices occur due to factors like market inefficiencies, timing, or liquidity gaps. Traders exploit these opportunities by buying an asset in one market where the price is lower and simultaneously selling it in another market where the price is higher, aiming to secure a profit with minimal risk.

Arbitrage can be applied to various asset classes, such as stocks, precious metals, forex, and cryptocurrencies. However, these opportunities are often brief, as they are driven by temporary inefficiencies. Once identified, traders must act quickly to capitalize on them before prices adjust and the discrepancy disappears. This rapid price adjustment is the result of market forces reacting to correct the inefficiency, making arbitrage a time-sensitive strategy.

Types of Arbitrage

Traders use several types of arbitrage strategies to profit from price discrepancies across different markets. The most common types include:

1. Pure Arbitrage

Pure arbitrage is the most straightforward type of arbitrage. It occurs when there is a clear price discrepancy for the same asset in two different markets. A trader buys the asset in one market where it is priced lower and simultaneously sells it in another where the price is higher. This strategy ensures a risk-free profit as long as the trader can act quickly and the transaction costs, including fees and commissions, are accounted for.

The key to successful pure arbitrage is speed. These opportunities are typically short-lived as other market participants, such as high-frequency traders, quickly spot and exploit them.

Example: A stock is trading for $100 on Exchange A and $105 on Exchange B. A trader buys the stock on Exchange A and sells it on Exchange B, profiting from the $5 difference per share. This arbitrage opportunity disappears quickly as other traders catch on.

2. Merger Arbitrage

Merger arbitrage, also known as risk arbitrage, occurs in the context of corporate mergers and acquisitions. When a company is being acquired, its stock price often trades below the acquisition price offered by the acquiring company, creating an arbitrage opportunity. In this strategy, a trader purchases the stock of the target company at a discount and waits for the acquisition to be completed. Once the deal is finalized, the stock price typically rises to match the acquisition price, allowing the trader to sell the stock for a profit.

Merger arbitrage is typically seen as lower risk, but it can still involve uncertainties such as regulatory hurdles or unexpected delays in the acquisition process. The key to this strategy is timing: the trader must enter before the merger is completed and exit once the stock price converges with the acquisition price.

Example: A company’s stock is trading at $50, while the acquiring company offers to buy it for $60. A trader buys the target company’s stock at $50, anticipating that the price will reach $60 when the deal is finalized, securing a $10 profit per share.

3. Triangular Arbitrage

Triangular arbitrage is specific to the forex market. It involves taking advantage of discrepancies in exchange rates between three currencies. The trader exchanges one currency for another, then converts that currency into a third, and finally converts the third currency back into the original currency. The trader profits from the differences in the exchange rates during these steps.

This form of arbitrage typically requires quick execution as currency markets are highly liquid and efficient, making opportunities fleeting. Triangular arbitrage also requires the use of sophisticated software or algorithms to spot price discrepancies across multiple currency pairs.

Example: A trader notices that the exchange rates for major currency pairs, such as EUR/USD, EUR/GBP, and GBP/USD, create an arbitrage opportunity. The trader might convert USD to EUR, then EUR to GBP, and finally GBP back to USD, profiting from the differences in the exchange rates between the three currencies.

4. Convertible Arbitrage

Convertible arbitrage involves trading a convertible bond, which can be exchanged for the issuing company’s stock and the underlying stock itself. This strategy capitalizes on the price difference between the convertible bond and the stock. The trader typically buys the convertible bond, which is undervalued relative to the stock, and simultaneously short-sells the underlying stock to hedge against any potential downside.

As the price of the underlying stock rises, the trader can convert the bond into stock, benefiting from the price discrepancy. This strategy is often used by hedge funds and institutional investors because it requires significant capital and expertise.

Example: A trader buys a convertible bond at $95, which can be converted into stock at a rate of 1:1. The stock is trading at $100, and the bond is undervalued relative to the stock. The trader shorts the stock to hedge the position, and when the bond is converted to stock, the trader profits from the price difference as the stock price rises.

Arbitrage in Various Asset Classes

Arbitrage trading can be applied across several asset classes, each with its unique opportunities and challenges. Here’s how arbitrage works in different markets:

1. Forex Arbitrage

In the foreign exchange (forex) market, arbitrage arises from discrepancies in exchange rates between currency pairs across different platforms or geographic locations. This occurs when the value of a currency pair varies slightly between two or more exchanges. Traders can exploit these differences by quickly buying the undervalued currency and selling it where it’s valued higher, thus securing a profit.

Example: Imagine you spot the following discrepancies:

• EUR/USD is priced at 1.2000 on Exchange A.
• USD/GBP is priced at 0.7500 on Exchange A.
• EUR/GBP is priced at 0.9000 on Exchange B.

You can engage in triangular arbitrage by converting EUR to USD on Exchange A, then USD to GBP on the same exchange, and finally GBP back to EUR on Exchange B, profiting from the discrepancies in exchange rates.

Discover what the most traded currency pairs are.

2. Commodity Arbitrage

Commodity arbitrage occurs when there are price differences between the spot and futures prices of commodities, or between different exchanges dealing with the same commodity. Traders can take advantage of these differences by buying the commodity in the cheaper market and selling it in the more expensive one.

Example: Consider crude oil trading at $50 per barrel on the spot market, while the same commodity is priced at $55 on a futures exchange. A trader could buy oil at the lower spot price and simultaneously sell a futures contract for the higher price, locking in a $5 profit per barrel.

Discover the most traded commodities in the world.  

3. Cryptocurrency Arbitrage

Cryptocurrency markets are notoriously volatile, and price discrepancies often occur between exchanges due to the decentralized nature of these markets. Arbitrage traders can take advantage of these inefficiencies by buying a cryptocurrency at a lower price on one exchange and selling it at a higher price on another.

Example: Bitcoin might be priced at $90,000 on Exchange A and $90,500 on Exchange B. A trader can buy Bitcoin on Exchange A and sell it on Exchange B, profiting from the $500 price difference. However, this opportunity might be short-lived as market participants quickly act to correct the price discrepancy.

4. Stock and Equity Arbitrage

In the equity markets, arbitrage can apply to stock prices, futures contracts, options, and even convertible bonds. Traders often exploit the differences in prices between the actual stock and its derivatives or between stocks listed on different exchanges.

Example: A common example of stock arbitrage is when a stock is listed on multiple exchanges at different prices. For instance, if XYZ Corp is trading for $100 on Exchange A and $105 on Exchange B, a trader could buy shares on Exchange A and sell them on Exchange B, profiting from the $5 difference.

Discover the largest stock exchanges in the world by market capitalization. 

Factors Affecting Arbitrage Profitability

While arbitrage may seem like a risk-free way to profit, its success depends on several key factors:

• Speed of Execution: Arbitrage opportunities are often short-lived, so traders need to execute their trades quickly. High-frequency trading (HFT) and algorithmic trading tools are commonly used to capitalize on opportunities.
• Transaction Costs: Arbitrage trading often involves multiple trades across different markets or exchanges. The costs associated with these trades, including fees, commissions, and spreads, can erode profits if they are too high.
• Market Liquidity: Arbitrage opportunities tend to occur in liquid markets where assets are frequently bought and sold. In illiquid markets, arbitrage might be less profitable or even impossible to execute.
• Volatility: Market volatility can impact the profitability of arbitrage opportunities. Significant price swings can result in the opportunity disappearing before the trade can be executed, or the trade could be executed at a less favorable price.

How to Get Started with Arbitrage in Trading

To successfully engage in arbitrage trading, follow these key steps to increase your chances of success:

1. Understand How Arbitrage Works

Learn the basics of arbitrage, including how price discrepancies in different markets create profit opportunities. Understand the types of arbitrage, such as pure, triangular, and statistical arbitrage.

2. Select a Reliable Broker

Choose a reliable broker like VT Markets that offers competitive fees, fast trade execution, and access to multiple markets for seamless arbitrage trading.

3. Choose Your Asset Class

Decide on an asset class, such as forex, commodities, or stocks. Each has unique arbitrage opportunities.

4. Research and Analyze Market Opportunities

Monitor price differences between markets and use real-time data to identify potential arbitrage opportunities.

5. Execute Trades

Once an opportunity is identified, act quickly to execute your trades. Speed is critical in arbitrage.

6. Manage Risks

Consider transaction costs and market volatility, and use risk management tools like stop-loss limits to manage risks and protect your profits.

7. Monitor & Stay Informed

Continuously track the markets for new opportunities and use alerts or bots to stay updated on price discrepancies.

Risks and Limitations of Arbitrage Trading

While arbitrage can be a low-risk strategy, there are still potential risks and limitations:

• Transaction Costs: As mentioned, transaction fees and spreads can significantly reduce profits. These costs must be factored into your strategy.
• Execution Risks: Delays in executing trades can eliminate any potential profit from an arbitrage opportunity. Market fluctuations can also change the price difference before the trade is completed.
• Market Liquidity: In some cases, liquidity issues can prevent a trader from fully executing an arbitrage strategy, leading to less profit or a missed opportunity.
• Technological Failures: Reliance on technology means that any technical issues, such as server downtime or internet connectivity problems, can disrupt arbitrage trading.

In Summary

Arbitrage trading offers traders an exciting opportunity to profit from market inefficiencies. By understanding the different types of arbitrage and applying the right strategies, traders can take advantage of price discrepancies across various asset classes. However, to succeed in arbitrage trading, it is crucial to consider the risks and limitations, such as transaction costs and execution delays.

Start Arbitrage Trading Today with VT Markets

Are you ready to explore arbitrage trading? With VT Markets, you can access a variety of trading tools and platforms, including MetaTrader 4 (MT4) and MetaTrader 5 (MT5), to identify profitable arbitrage opportunities and ensure seamless execution across multiple markets. Whether you’re trading in forex, stocks, or commodities, our Help Centre is here to support you every step of the way.

Start your arbitrage trading journey today with VT Markets and capitalize on market inefficiencies to unlock new profit opportunities.

Frequently Asked Questions (FAQs)

1. What is arbitrage in trading?

Arbitrage in trading is the practice of buying and selling an asset in different markets or exchanges to exploit price differences and make a profit.

2. How do arbitrage traders make money?

Arbitrage traders make money by buying an asset in one market at a lower price and selling it in another market at a higher price, pocketing the price difference.

3. Can anyone do arbitrage trading?

Yes, anyone with the right tools, knowledge, and access to multiple markets can engage in arbitrage trading. However, it’s typically more accessible for institutional traders due to the resources required.

4. What are the risks of arbitrage trading?

The risks include transaction costs, execution delays, market volatility, and technological failures.

5. How do I get started with arbitrage trading?

First, understand how arbitrage works. Then, select a reliable broker like VT Markets. Choose your asset class (forex, commodities, shares). Research market opportunities, execute trades quickly, manage risks, and monitor the markets.

6. What types of assets can I use for arbitrage trading?

Arbitrage can be applied to a variety of assets, including forex, stocks, commodities, cryptocurrencies, and even bonds. The key is identifying price discrepancies across markets for these assets.

7. Is arbitrage trading risk-free?

While arbitrage trading is considered low-risk compared to other strategies, it is not entirely risk-free. Market volatility, transaction fees, and delays in execution can reduce or eliminate profits.

8. How do transaction costs affect arbitrage profits?

Transaction costs, including fees and spreads, can eat into the profit margin from arbitrage opportunities. Traders must ensure that the price discrepancy is large enough to cover these costs.

9. How can I ensure I’m fast enough to take advantage of arbitrage?

To take advantage of arbitrage opportunities, use high-speed internet connections, trading platforms like MetaTrader 4 (MT4) or MetaTrader 5 (MT5), and automated trading systems designed for rapid execution.

The British pound is facing renewed pressure as markets respond to fiscal uncertainty, political shifts under the Labour government, and rising global trade tensions. With sentiment turning cautious, this analysis explores the key drivers behind sterling’s decline and what could shape its path in the near term.

Pound sinks to two-week low

The British pound came under heavy selling pressure on Monday, dropping to $1.3607 – its lowest point in two weeks.

After reaching an earlier high of 1.3681, sterling reversed course as markets grew increasingly concerned about the UK’s fiscal outlook and internal developments within the Labour Party.

Comments from Chancellor Rachel Reeves in The Guardian raised red flags among investors. She hinted that tax increases could be included in the autumn budget, refraining from providing specific figures.

Even this possibility was enough to dampen sentiment, with market participants wary of the potential economic drag associated with higher tax burdens.

Labour’s policy U-turn triggers fresh market unease

Beyond fiscal concerns, a recent shift in Labour’s approach to welfare reform has added to the uncertainty.

Reeves acknowledged that compromises had to be made to maintain party unity, admitting these decisions would “carry costs.”

This backpedalling has sparked speculation about tighter fiscal measures ahead – whether through spending cuts or additional taxes – which has in turn eroded confidence in UK assets.

The pound’s fall signals growing reluctance among investors to hold sterling-denominated instruments in an increasingly unstable policy environment.

Dovish monetary outlook holds steady

While political and fiscal anxieties weigh on sentiment, expectations for UK interest rates remain largely unchanged.

Markets continue to anticipate a 25-basis-point rate cut from the Bank of England in September, given the easing inflation trend and the UK economy’s sluggish growth.

However, the pound’s weakness could complicate monetary policy decisions. A further decline may lead to imported inflation, as the cost of foreign goods rises – potentially forcing the BoE to reconsider or delay its easing cycle.

US tariffs intensify external headwinds

Global trade tensions have added another layer of pressure. Former President Donald Trump confirmed that reciprocal tariffs would return from 1 August, reverting to levels seen on 2 April for countries lacking formal trade deals.

US Treasury Secretary Scott Bessent warned that nations without completed agreements would face higher default rates.

Trump also suggested a 10% punitive tariff on countries aligned with what he described as “anti-American BRICS policies.”

This rhetoric has reinforced a risk-off mood in global FX markets. With the US dollar already supported by robust labour data and reduced expectations for Fed rate cuts, sterling has faced additional downward drag.

Technical analysis: Bearish momentum builds

GBP/USD continued its downward correction, slipping to an intraday low of 1.36028 following a retreat from the recent high of 1.36815.

Picture: GBPUSD dips below 1.3610 as downside momentum builds. Support eyed at 1.3580, as seen on the VT Markets app.

The pair remains below its 5-, 10-, and 30-period moving averages – all of which are trending downward – indicating sustained short-term bearish momentum.

The MACD indicator is firmly below its signal line, with the histogram expanding in negative territory.

Unless the pair can reclaim the 1.3620 level soon, a further move toward 1.3580 looks increasingly likely.

Traders may also monitor for early signs of bullish divergence on the MACD as a potential reversal cue.

Policy developments steer the outlook

With focus now turning to the autumn budget and the Bank of England adopting a dovish stance, GBP/USD is likely to remain under pressure in the near term.

Unless the UK government provides greater clarity on fiscal policy or economic data surprises on the upside – particularly in employment – the pound could find it difficult to break back above the 1.3680 threshold.

Meanwhile, any escalation in US trade policy ahead of 1 August could further lift the dollar and keep cable subdued.

Click here to open account and start trading.

Entering mid-July, markets face a transitional phase as trade policy uncertainties, central bank commentary, and macroeconomic data shape sentiment. With the US tariff pause set to expire on 9 July, investors remain cautious. This week’s influences include the Fed’s July meeting minutes, the UK’s CPI release, and shifting flows across global assets.

KEY INDICATORS

Foreign exchange market

Dollar expected to remain soft in July.

Over 80% of analysts forecast further dollar weakness, driven by ongoing uncertainty.

Foreign investors are increasing USD hedging on US stocks, signalling caution.

Commodities & equities

Oil rally stabilises, with prices expected to average $67–68 in 2025.

US equity funds saw a $31.6 billion inflow last week, reflecting strong investor confidence.

Investors are awaiting the expiry of the US tariff pause on 9 July, which could impact market sentiment.

US equities face pressure from tariff uncertainties and concerns over Fed independence.

Asian markets & key events

Hong Kong stocks surged 21% year-to-date, bolstered by mainland Chinese inflows.

Foreign investors are increasingly favouring Asian markets, supporting Chinese and regional equities.

MARKET MOVERS

XAU/USD

• Technical breakout: Gold remains range-bound with key resistance at $3,355–$3,375 and support near $3,335–$3,300. A valid breakout above $3,375 would signal bullish momentum, while a drop below $3,300 would suggest a bearish shift.
• Target projection (bullish): A breakout above $3,375 targets $3,400–$3,415, with potential to extend to $3,450–$3,500.
• Target projection (bearish): A break below $3,300 opens the path to $3,275–$3,260, with further downside towards $3,240–$3,220.
• Opening expectation: Gold is expected to open near $3,335–$3,345, supported by safe-haven flows and a slightly softer USD following economic data releases and tariff headlines.
• Primary support zone: $3,335–$3,330 (recent daily consolidation area).
• Secondary support zone: $3,300–$3,295 (lower triangle/channel support).
• Tertiary support zone: $3,275–$3,260 (prior range lows and Fibonacci area).
• Strategy (bullish approach): Buy on a breakout above $3,375 with targets at $3,400 and $3,415–$3,450.
• Strategy (bearish approach): Short on a breakdown below $3,300 with targets at $3,275–$3,260, extending to $3,240–$3,220.
• Stop-loss level: Below $3,330 for bullish positions; above $3,385 for bearish positions.
• Key catalysts this week: US inflation data (PPI/PCE), Fed minutes, tariff headlines tied to the 9 July deadline, and safe-haven flows from global risk events.

EUR/USD

• Technical breakout: EUR/USD is currently consolidating beneath its recent peak at 1.1836–1.1850. A valid breakout above 1.1836–1.1850 would confirm a bullish trend continuation, while a breakdown below 1.1680–1.1700 would shift the bias to bearish, with a move toward deeper support.
• Target projection (bullish): A breakout above 1.1836–1.1850 targets 1.1875–1.1900, with potential to extend to 1.2000–1.2200 by year-end.
• Target projection (bearish): A break below 1.1680 opens the path to 1.1635–1.1670, with further downside towards 1.1439–1.1465.
• Opening expectation: EUR/USD is expected to open near 1.1770–1.1785, supported by continued dollar weakness and reduced summer volatility.
• Primary support zone: 1.1680–1.1700 (crucial short-term support and recent convergence point).
• Secondary support zone: 1.1635–1.1670 (earlier consolidation and pullback area).
• Tertiary support zone: 1.1439–1.1465 (deeper Fibonacci/wedge base if prices erode significantly).
• Strategy (bullish approach): Buy on a breakout above 1.1836 with targets at 1.1875–1.1900, extending to 1.2000–1.2200.
• Strategy (bearish approach): Short on a breakdown below 1.1680 with targets at 1.1635–1.1670, extending to 1.1439–1.1465.
• Stop-loss level: Below 1.1680 for bullish positions; above 1.1850 for bearish positions.
• Key catalysts this week: US FOMC minutes, tariff headline risks—especially with the 9 July deadline approaching, European retail sales, and German industrial production, which could impact ECB policy outlook.

Crude Oil WTI

• Technical breakout: WTI is consolidating just below its recent high around $68–$68.50, forming a bullish pennant. A breakout above $68.50–$69.00 would confirm renewed bullish momentum.
• Target projection (bullish): A breakout above $68.50–$69.00 targets $70.00–$71.00, with potential to extend to $75.00+ if supported by political risk or supply news.
• Target projection (bearish): A breakdown below $65.60–$65.80 opens the path to $63.70–$64.00, with further downside towards $61.80–$62.00.
• Opening expectation: Oil is expected to open in the $66.50–$67.00 range, supported by geopolitical uncertainty and steady demand data.
• Primary support zone: $65.60–$65.80 (base of the current range and weekly pivot).
• Secondary support zone: $63.70–$64.00 (lower bound of consolidation).
• Tertiary support zone: $61.80–$62.00 (long-term support zone if weakness extends).
• Strategy (bullish approach): Buy on a breakout above $68.50 with targets at $70.00 and $71.00–$75.00+.
• Strategy (bearish approach): Short on a breakdown below $65.60 with targets at $63.70–$64.00, extending to $61.80–$62.00.
• Stop-loss level: Below $65.80 for bullish positions; above $68.50 for bearish positions.
• Key catalysts this week: US inflation data (PPI/PCE), FOMC minutes, tariff headlines tied to the 9 July deadline, and geopolitical risks impacting oil prices.

NEWS HEADLINES

Trade tensions rise ahead of key deadline

Trump dismissed Elon Musk’s new “America Party” as “ridiculous,” escalating political polarisation ahead of trade talks.

The White House confirmed tariff notification letters will be sent by 9 July to countries including India, Korea, and Indonesia.

US trade deal talks continued under pressure, with last-minute efforts focused on Asia amid widening global uncertainty.

Dollar weakens as trade fog builds

The US dollar hovered near multi-year lows as traders awaited clarity on upcoming tariff actions.

India’s rupee dropped to ₹85.70 per USD, reflecting broader weakness across Asian currencies.

Markets react to shifting trade signals

Oil prices declined after OPEC+ raised output and geopolitical risk premiums faded.

London Metal Exchange (LME) trading volumes surged to a decade high on tariff-driven volatility.

European equities traded flat, reflecting caution over US trade uncertainty.

Asian markets dipped as tariff delays and oil weakness weighed on sentiment.

Gulf equities edged higher on optimism around extended US tariff reprieves.

Thailand reported its third straight month of deflation, reinforcing regional dovish outlooks.

Click here to open account and start trading.

Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume”.

Please refer to the table below for more details:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.