What is arbitrage?

Arbitrage is a trading strategy. Whose objectives are from similar or identical assets profit from a small change in price. Usually, arbitrage refers to buying an asset from one place and immediately selling it elsewhere at a higher price.

Where have you heard of arbitrage?

Most of us have heard the classic trading cheats "buy low, sell high". Arbitrage is its abbreviation. It is a proven strategy used by all types of traders, from hedge fund managers to new investors.

What you need to know about arbitrage...

Suppose a company's stock is in. London Stock Exchange the transaction price is 10 pounds. But in new York Stock Exchange the price is 11 pounds. You can make a profit by buying at a low price from the London Stock Exchange and selling immediately on the New York Stock Exchange. You can continue to do so while the share price maintains the above situation.

However, professional traders usually use technology to find arbitrage opportunities early. This makes arbitrage a difficult strategy for new investors, as the technology in question may have already discovered and executed the trade by the time an arbitrage opportunity arises.

In addition, there is the issue of transaction costs. Any transaction, whether bought or sold, is subject to a transaction fee. When an arbitrage strategy is implemented, if the potential profit is low, the transaction fee may reduce or even completely offset the profit.

Remember, even if there is a profit opportunity, you can still lose money.