About Lesson
Arbitrage trading is a trading strategy that aims to generate profit by simultaneously buying an asset in a market and selling it in another. This is most commonly done between identical assets traded on different exchanges. The difference in price between these financial instruments should, in theory, be zero since they’re quite literally the same asset.
The challenge an arbitrage trader, or arbitrageur, has is not only finding these pricing differences, but also being able to trade them quickly. Since other arbitrage traders are likely to see this difference in price (the spread) as well, the window of profitability usually closes very fast.
On top of that, since arbitrage trades are generally low-risk, the returns are generally low. That means arbitrage traders not only need to act quickly, but they need a lot of capital to make it worth it.
You might be wondering what types of arbitrage trading is available to cryptocurrency traders. There are certain types to take advantage of, so let’s get right into it.