Arbitrage is a trading strategy where a person takes advantage of price differences for the same asset in different markets. The goal is simple—buy at a lower price in one place and sell at a higher price in another, making a profit from the gap.
This strategy is commonly used in financial markets such as stocks, cryptocurrencies, and forex. For example, if a cryptocurrency is priced lower on one exchange and higher on another, a trader can buy from the cheaper exchange and sell on the more expensive one.
Arbitrage is often considered low-risk because it relies on existing price differences rather than market predictions. However, it requires speed, accuracy, and awareness of factors like transaction fees, market volatility, and execution delays, which can reduce profits.
In summary, arbitrage is about spotting and acting quickly on pricing inefficiencies to generate small but consistent gains.
