Triangular arbitrage and why retail cannot win the race

[Amanhasnoname]

Three pairs, like EURUSD, GBPUSD, and EURGBP, should stay in line mathematically. When they do not, there is a theoretical profit from trading all three. It is called triangular arbitrage.

The gaps exist, but they are tiny and last for milliseconds. Banks and funds with colocated servers capture them almost instantly, so retail traders see the leftovers, if anything.

Many forum posts and sold courses claim a retail version works. Usually the profit disappears once spreads on three legs are included, plus slippage on each, plus the delay between sending the orders.

Still, the idea has value as a monitoring tool. When the three pairs drift apart for longer than usual, it can signal stress in liquidity, which affects spreads and fills.

Watching the implied cross versus the actual price can serve as an early warning that conditions are unusual, even if it is not a trade.

Has anyone tested the arbitrage idea at retail speeds, and did the numbers survive the real costs?