Triangular arbitrage looks for three exchange rates that do not quite agree. Convert A to B, B to C and C back to A: if you end with more than you started, there is a gap. Enter your rates and fees to check it.
| Step | Conversion | Rate | You hold |
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See why cross rates must stay consistent.
Spot an exchange office with an out-of-line rate.
See how small fees erase thin gaps.
If 1 USD buys 0.92 EUR and 1 EUR buys 0.86 GBP, then 1 USD effectively buys 0.7912 GBP. The direct GBP to USD rate should therefore be about 1 / 0.7912 = 1.2639. Any other rate leaves a gap.
In the reverse direction the same gap becomes a loss, so with mid-market rates one direction is profitable and the other is not. Bid/ask spreads mean both directions usually lose.
Forward loop gains before fees.
Reverse loop gains before fees.
Charged three times per loop.
Profiting from inconsistent exchange rates between three currencies. If USD to EUR, EUR to GBP and GBP to USD multiply to more than 1, converting around the loop returns more dollars than you started with.
Multiply the three rates: (A to B) x (B to C) x (C to A). A product of 1.002 is a 0.2% gap before costs.
Banks and trading algorithms watch these relationships constantly and close gaps in milliseconds. Spreads and fees usually cost more than any visible gap.
The B to C rate implied by the other two quotes: 1 / ((A to B) x (C to A)). If the quoted B to C rate differs, the loop has a gap.
This is an educational checker. Quotes go stale quickly and execution costs, slippage and transfer times can turn a paper profit into a loss.
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