Arbitrage trading exploits fleeting price discrepancies of the same asset across different markets. Traders, known as arbitrageurs, simultaneously buy the asset where it's cheaper and sell it where it's more expensive, locking in a risk-free profit. These opportunities arise due to market inefficiencies, such as differences in supply/demand, exchange rates, or even technological delays. While individual profits are often small, high-frequency trading firms leverage advanced algorithms to execute numerous such trades rapidly, contributing to market efficiency by pushing prices towards equilibrium. Examples include spatial arbitrage across exchanges or triangular arbitrage in forex.

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