Arbitrage trading strategy is a technique to seek profit from price differences of the same asset in two or more places. This strategy is often considered low risk, but it requires speed, capital, and precise execution.
🔍 What is Arbitrage Trading?
Arbitrage = buy an asset in one market at a low price, then sell it in another market at a higher price simultaneously.
📈 Types of Arbitrage Trading Strategies
1. Spatial Arbitrage (Between Exchanges)
Buy an asset on Exchange A (e.g., Binance) → sell on Exchange B (e.g., KuCoin).
Example: BTC on Binance = $29,900, on KuCoin = $30,050 → buy on Binance, sell on KuCoin.
🛠️ Needs: accounts on 2 exchanges, fast transfer (fast blockchain network), and low transfer fees.
2. Triangular Arbitrage
Exploit price differences between three currency pairs on one exchange.
Example: USDT → BTC → ETH → USDT.
🎯 Goal: Get more USDT than initially.
3. Funding Rate Arbitrage (Futures vs Spot)
Used in the crypto market.
Strategy:
Long Spot (buy asset)
Short Futures (sell futures contract of the same asset)
Profit from positive funding rates (paid by long traders in futures).
💡 Usually done when funding rates are very high.
4. Statistical Arbitrage (Quant Strategy)
Use algorithms/statistics to detect short-term price anomalies between assets that are usually correlated.
Suitable for algo traders and requires programming + statistical models.
5. Cross-border Arbitrage
Buy an asset in country A's market, sell in country B at a higher price.
Often occurs in stocks, commodities, or crypto when there are different regulations between countries.
⚠️ Arbitrage Risks
Delay (Slippage): price can change when the transfer is not yet complete.
Transfer costs/fees: can eat into profit.
Liquidity: quiet market = hard to sell quickly.
Regulation: some countries restrict price differences or cross-border arbitrage.
✅ Supporting Tools for Arbitrage
Arbitrage scanner:
CoinMarketCap Arbitrage Tool
Coinglass (for funding rate arbitrage)
ArbitrageScanner.io (paid)
