TradingIntermediate#Strategy#Execution
Arbitrage
A
Definition
The simultaneous purchase and sale of an asset in different markets to exploit price inefficiencies for profit.
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Concept Diagram
Key Takeaways
1
Arbitrage profits from price differences of the same asset across different markets or exchanges
2
Cross-exchange arbitrage buys low on one exchange and sells high on another simultaneously
3
Triangular arbitrage exploits pricing inconsistencies between three trading pairs on one exchange
4
Success requires fast execution, low fees, and sufficient capital across multiple platforms
Practical Example
BTC trades at $64,800 on Binance and $65,100 on Kraken. You buy 1 BTC on Binance and sell on Kraken simultaneously, pocketing $300 minus ~$20 in fees — a $280 risk-free profit in seconds.
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Related Terms
Strategy
Autonomous ArbitrageThe automated execution of trades across different exchanges to profit from minute price discrepancies.
Strategy
Funding ArbitrageA strategy that profits from the difference between the perpetual funding rate and a spot position.
Blockchain
Flash LoansUncollateralized loans that must be borrowed and repaid within the same blockchain transaction, often used for arbitrage.
Blockchain
DEX (Decentralized Exchange)A P2P marketplace where users can trade cryptocurrencies directly without a central intermediary taking custody of funds.
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