The Understanding Of Cryptocurrency Arbitrage Trading #002

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Good day fam,

It is your humble friend again @mato445 and I hope everyone is doing fine.

I am happy to be here in this great community to make post and interact with members of this community.

Without spending much time, let's continue our explanation on arbitrage trading, but this time we shall be learning about the advantages of arbitrage trading.

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ADVANTAGES OF ARBITRAGE TRADING

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There are several advantages of arbitrage trading and we shall be discussing about some of them.

• Risk Free Profit:

One of the major advantages of arbitrage trading is it's ability to give risk free profit.

The traders involved in arbitrage trading locks in profit with the market irrespective of the market direction, since it has to do with buying and selling of same assets simultaneously.

This risk-free nature of arbitrage trading makes it a very attractive trading techniques for investors who are seeking to make stable profits irrespective of market condition.

• Exploiting Price Inefficiencies:

Another advantage of arbitrage trading is that it seeks to take advantage of price differences between markets.

This price differences is as a result of market inefficiencies and this often results from transaction costs, delayed information dissemination, supply and demand dynamics.

These gaps are being exploited by traders to make quick and efficient trades.

• Market Efficiency Improvement:

Another advantage of arbitrage trading is that with the presence of arbitrage traders, the efficiency of the market is being improved.

As they seek to exploit price differences, they help to bridge the gap between market differences.

And this plays a huge role in ensuring that assets reflects their intrinsic value more accurately.

• Liquidity Provision

Liquidity in the market is enhanced by arbitrage traders as their trades are executed with respect to price differences.

Their activities in the market helps to ensure that assets are more readily available to be traded, thus reducing bid-ask spread in the market.

Other market participants benefit a lot from this provision of liquidity done by arbitrage traders.

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• Utilization Of Technology

Arbitrage trading is highly dependent on automated trading systems and technologies.

Arbitrage opportunity can be identified and executed within a very short time with the use of high frequency trading algorithm.

And this makes it feasible for small price differentials to be capitalized on.

Conclusion

Arbitrage trading is a very effective trading technique that helps investors to make profit from a no-risk trade.

We have considered some advantages of arbitrage trading but due to lack of enough time, we will continue our post next time.