What is Arbitrage?
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Whereas the stock exchange is only open for an average 6.5hrs on weekdays alone, cryptocurrency can be traded on exchanges 24hrs, 7 days a week.
This opens up a much wider range of trading opportunities with potential profit taking. Arbitrage enables profit gains from the simple act of buying and selling across different exchanges. Large volume trades can temporarily alter the price of a cryptocurrency on one exchange compared to another, which will inevitably self-correct and even out. |
A quick engagement in this temporary price discrepancy may often be considered as practically riskless profit for the investor.
Studies based on the stock exchange demonstrate that high frequency traders have repeated opportunities to take profit when prices for the same security differ across the many exchanges.
The ideal trade should be almost instant to exploit the brief window of profit opportunity resulting in profit but a zero hold position, freeing up the trader for the next momentary prospect. These regular price discrepancies create arbitrage opportunities throughout the trading day.
As an individual you are limited by your own funds, warranting a fairly significant price difference in order to achieve a profit after accounting for transaction costs incurred.
Additionally, the price variations are only passing which means a swift response is needed.
Studies based on the stock exchange demonstrate that high frequency traders have repeated opportunities to take profit when prices for the same security differ across the many exchanges.
The ideal trade should be almost instant to exploit the brief window of profit opportunity resulting in profit but a zero hold position, freeing up the trader for the next momentary prospect. These regular price discrepancies create arbitrage opportunities throughout the trading day.
As an individual you are limited by your own funds, warranting a fairly significant price difference in order to achieve a profit after accounting for transaction costs incurred.
Additionally, the price variations are only passing which means a swift response is needed.
The benefits of utilising an established platform, is that pooled funds from many individuals enable profits to be achieved on much smaller price discrepancies across the trading exchanges, at a lower risk. Some exchanges also offer discounts on transaction fees with more frequent trading.
The addition of a trading bot means a watchful eye can be maintained across the exchanges, and with respect to numerous trading pairs. A fast, automated response based on specific parameters can be achieved. With more than 60 trading platforms available and weighing in factors such as liquidity, fees and the exchange country, a successful platform that you can participate in presents an impressive advantage. |
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*Please understand that the information on this site does not constitute financial advice in any way.