#TradingTypes101 7. Arbitrage Trading

* Timeframe: Extremely short-term, often milliseconds.

* Goal: To exploit tiny price differences for the same asset across different markets or exchanges.

* Characteristics:

* Risk-Free (Theoretically): In its purest form, arbitrage is considered risk-free because trades are entered and exited simultaneously, locking in a profit. However, in practice, execution risk and speed requirements introduce some risk.

* High-Frequency: Requires ultra-fast systems to detect and execute trades before the price discrepancies disappear.

* Low Profit Per Trade: Each individual arbitrage trade yields a very small profit. Success comes from the volume of trades.

* Automated: Almost exclusively done by sophisticated algorithms and trading bots.

* Instruments: Cryptocurrencies (across exchanges), forex, stocks, futures.

* Ideal For: Institutions and quantitative traders with access to advanced technology, high-speed connections, and significant capital.

This "TradingTypes101" covers the most common approaches. Many traders combine elements of these types, and individual strategies can be highly nuanced. Regardless of the type, risk management and a well-defined trading plan are paramount for long-term success.