Arbitrage trading is the simultaneous purchase and sale of an asset in different markets to profit from tiny price differences. It is a low-risk strategy that exploits market inefficiencies, ensuring the same asset (like stocks, crypto, or commodities) is bought cheaply and sold higher elsewhere. These opportunities are usually short-lived and require fast, often automated, execution

Types of Arbitrage trading:
Pure/Spatial Arbitrage: Buying an asset in one location and selling it in another at a higher price.

Inter-Exchange Arbitrage: Buying crypto or stocks on one exchange and selling on another.

Futures/Cash-and-Carry Arbitrage: Buying a physical asset (spot market) and selling it in the futures market.

Requirements: Requires high speed and technology, as opportunities disappear quickly, often with automated bots.

Risks: While low-risk, pitfalls include transaction costs (fees, taxes) eating into profits, liquidity issues, and execution delays.

Market Impact: Arbitrage improves market efficiency by eliminating price disparities and enhancing liquidity.