An Effective Way To Earn From The Cryptoworld: Arbitrage Trading.. Part 4

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Hello crypto friends,

It is another beautiful day and I am here in this great Community.

I believe you are all doing great and fine, and you are actively promoting steemit on twitter.

I am happy to be here today to discuss with you all on an issue of great importance.

In our last discussion, we learnt in the types of arbitrage trading and today we shall be examining the features of arbitrage trading, please hang around and pay more than usual attention as this will be very interesting.

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FEATURES OF ARBITRAGE TRADING

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We shouldn't forget that arbitrage trading refers to a trading technique in which traders take advantage of price discrepancies of a pair by buying at a point where the price is low and selling when the price is high.

• PRICE DISCREPANCIES:

Price discrepancies is a feature of arbitrage trading and it refers to the phenomenon where by there is difference in price of a commodity which is usually caused by some market factors.

Here, you can notice that the price of a commodity in a particular market is higher than that in another market.

This is then an opportunity to buy from the market with lower price and sell in a market with a higher price.

Most times, price discrepancies occur due to variation in supply and demand, delay in information dissemination and market inefficiencies.

• QUICK EXECUTION:

Another Important feature of arbitrage trading is quick execution

The ideal condition of the market is for it to be balance, the market moves to automatically correct any imbalances within it as quickly as possible.

Then as an arbitrage trader, you need to execute your trade as quickly as possible before the market corrects itself.

Whenever a trader allows the market to correct itself, he looses his trading opportunity and this is not a good thing.

• RISK MITIGATION:

Risk mitigation is another very important feature of arbitrage trading.

Arbitrage traders tend to mitigate risks by buying and selling from different markets simultaneously.

This technique helps to lock in profit in a trade irrespective of the overall market price, provided the price difference is large enough to cover the transaction costs.

• ACCESS TO MULTIPLE MARKET:

Another feature of arbitrage trading is that it requires access to multiple market.

Remember that arbitrage trading has to do with trading commodities from one market to another.

With having multiple market access, It will be impossible to carry out arbitrage trading.

• STATISTICAL ANALYSIS:

Statistical analysis is another feature of arbitrage trading, before you can be an arbitrage trader, you ought to learn to carry out statistical analysis on the historical price movement of commodities.

This will help you discern your entry and exit points in the market.

We shall be taking a break here, and shall continue on our next meeting.
Do have a nice day 😊