An Effective Way To Earn From The Cryptoworld: Arbitrage Trading.. Part 3

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With joy in my heart I humbly appear before this great community today again to discuss on another issue of great importance.

I believe you are all doing great and are actively supporting the twitter promotion of steemit.

In our last discussion, we examined arbitrage trading but due to time and other unexpected events, we were unable to complete our discussion.

Today, we shall be continuing our lessons from the other types of arbitrage trading.

• TEMPORAL ARBITRAGE TRADING:

Temporal arbitrage trading which is popularly known as time arbitrage trading refers to a trading technique where by traders aim to make profit from the discrepancies in price between different points in time.

It can also be explained to be a trading method whereby profit is made from the price discrepancies that occurs due to temporal factors and not traditional market inefficiencies.

The structure of arbitrage trading is that the price value fluctuate significantly over time, thus creating an opportunity to make profit from the market.

These trading strategy aims to profit from these price differences by buying when the price is low and then waiting for a time where the price increases for you to sell off.

For one to be a temporal arbitrage trader, one should be able to identify trading opportunities, one should be able to identify assets that have price discrepancies.

Also, a trader should be able to analyze historical price movement so as to be able to identify the entry and exit point of the trade.

• RISK ARBITRAGE:

Risk arbitrage which is often called merger arbitrage is a trading technique where by traders aim to take advantage of price discrepancies that occurs during the process of aquisition, cooperate merger and other cooperate restructuring.

This form of trading has to do with the simultaneous buy and sell of stock/commodities of companies

For example, when there is an announcement for a merger or aquisition between two companies, the price value of stocks of these companies experience fluctuations.

The price of the acquiring company declines while that of the target company rises.

The basic tactic behind arbitrage trading is that the traders ought to establish a market neutral position and this involves the minimization of exposure to overall stock market direction.

Here also, the trader tend to buy the stock of the target company while that of acquiring company is simultaneously been sold. By so doing, traders tend to profit from the market convergence that plays out as the deal attains completion.