Arbitrage is a trading strategy that exploits temporary price discrepancies of the same asset across different markets or exchanges. An arbitrageur simultaneously buys the asset in the market where it's cheaper and sells it in another where it's priced higher, locking in a risk-free profit.
These opportunities are typically short-lived, often lasting only milliseconds, due to the efficiency of modern electronic trading systems. Therefore, successful arbitrage usually requires high-speed execution, often facilitated by automated trading bots. While the profit per trade might be small, the strategy aims for high volume to generate significant returns. Arbitrage contributes to market efficiency by bringing prices across different venues into alignment.