Arbitrage
Simultaneously buying and selling the same asset in different markets to lock in a price gap.
Arbitrage is buying and selling the same asset in two markets to profit from a price gap.
Arbitrage is buying an asset in one market and selling it at a higher price in another to capture a price difference. The gap is usually small and short-lived because other traders close it within moments. For retail traders pure arbitrage is rarely available, but the idea of converging prices underlies cross-market analysis.
How It Works
- The gap is captured by simultaneous trades
- It closes quickly as traders exploit it
- Retail traders rarely get pure arbitrage
Trading Tips
Treat advertised arbitrage signals with suspicion
Look for convergence, not free money
Understand the spread costs before trying it
Arbitrage Example
Say Bitcoin trades $60,100 on one exchange and $60,250 on another. Buy 1 BTC on the first, sell on the second, and the $150 gap minus $40 in fees and transfer risk nets about $110, if both legs fill before the gap closes in seconds.
How Traders Use Arbitrage
Treat advertised retail arbitrage as education, not income: real gaps close in milliseconds to bots with co-located servers. The retail edge is understanding convergence, not racing it. Anyone selling easy arbitrage profits sells the shovel.
Related Terms
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