Arbitrage is the buying and selling of the same asset in different markets in order to take advantage of these price differences.
What is arbitrage?
Arbitrage is the strategy of purchasing and selling the same asset at different prices and markets. The simplest form of arbitrage is buying an asset in a market where the price is lower and simultaneously selling the asset in a market where the asset’s price is higher.
Trading with arbitrage
Arbitrage is generally exploited by large financial institutions since it requires significant resources to identify the opportunities and execute the trades. They are often performed using complex financial instruments, such as derivative contracts, digital assets, and other forms of instruments to find equivalent assets. For example, the demand for Bitcoin in one country is very high, which means Bitcoin prices are usually higher compared to other markets. It means that if you purchase Bitcoin from cheaper markets and sell it to other markets at a higher price, you will make a profit from this Bitcoin arbitrage.