#TradingStrategyMistakes Arbitrage trading is a strategy that aims to generate profits by exploiting price differences of the same asset or very similar assets in different markets. The central idea is to buy the asset where it is cheaper and sell it simultaneously (or almost simultaneously) where it is more expensive, obtaining a profit from that price difference, without assuming significant market risk.
Key Concept:
Arbitrage is based on market inefficiency. In a perfectly efficient market, the same asset should have the same price everywhere. However, due to factors such as information latency, differences in supply and demand between platforms, or transaction costs, small price discrepancies can arise that arbitrageurs seek to capitalize on.
How does it work?