Arbitrage
Simultaneously buying and selling the same asset in different markets to lock in a price gap.
Quick answer
Arbitrage is buying and selling the same asset in two markets to profit from a price gap.
Definition
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
1
Treat advertised arbitrage signals with suspicion
2
Look for convergence, not free money
3
Understand the spread costs before trying it
Related Terms
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