Quick answer: what is arbitrage trading?
Arbitrage trading is the operational side of capturing a price difference. It is not only finding a gap. It includes sizing, order placement, cost control, execution timing and risk limits.
Cross-exchange spot
This compares the same asset across two exchanges. You buy where it is cheaper and sell where it is higher. To do it quickly, capital often needs to be pre-positioned on both venues. Waiting for a blockchain transfer may be too slow.
Triangular arbitrage
Triangular setups happen inside one exchange by moving through three pairs, such as USDT to BTC, BTC to ETH, and ETH back to USDT. The key is the final balance after every fee and every conversion.
Perpetual versus spot
Perpetual futures are derivatives without expiry. They use funding payments to keep contract price close to spot. A trader may buy spot and short the perpetual to reduce directional exposure while studying funding income. Margin, liquidation and collateral risk remain central.
Basis trades
Basis is the difference between a future and spot price. If the future trades above spot, a trader may buy spot and sell the future, expecting convergence. This requires careful capital management and knowledge of expiry, margin and liquidity.
Metrics to track
You need gross spread, net spread, fill rate, slippage, latency, rejected signals, failed executions and drawdown. Without these numbers, the strategy is only a guess.
Common beginner mistakes
The first mistake is comparing last traded prices instead of executable order book depth. The second is ignoring maker/taker fees. The third is assuming every API response arrives on time. The fourth is scaling size before measuring slippage.
Next reading
Start with what is arbitrage, then connect strategy with AI arbitrage.