What is arbitrage trading?

Trading on an exchange is certainly a big risk, but even there you can find a way to trade with minimal losses. One of the lowest-risk ways to earn money on an exchange is arbitrage trading.

Arbitrage trading is a transaction with the purpose to make profit from the price difference for the same trading asset.

In simple words, it is a method of trading with minimal risks when a trader makes profit regardless of the direction of price movement.

The main feature of arbitrage trading is time. It is necessary to act very quickly because fractions of a second can play a major role here.

The principle of arbitrage trading

You have purchased Bitcoin the X exchange and sold it on the Y exchange. So, the main principle of arbitrage trading is to make profit on the price discrepancies of an asset on different platforms.

Advantages and disadvantages of arbitrage trading

Advantages:

— minimal risks

— a strategy that suits most assets

— no need to conduct in-depth market analysis

— full automation of trading.

Disadvantages:

— A small income due to a small risk. To get a good profit, you will need a lot of capital.

— It is quite a complex strategy compared to conventional trading strategies. We do not recommend that beginners start with this strategy.

— If you do arbitrage trading manually, you may not have the time to sell the asset.

Arbitrage trading is a great opportunity to earn small amounts with minimal risks.