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Arbitrage in Trading?
Arbitrage can be defined as the simultaneous buying and selling of the same asset in different markets to gain from the difference in price in both the markets. While arbitrage opportunity can arise in any asset class that is traded in different markets in a standardized form, it is more common in currency and stock markets.
Contrary to popular economic beliefs, markets are not completely efficient, which gives rise to arbitrage opportunities. The price of an asset is a result of the demand and supply in the market. Due to a discrepancy in supply and demand of an asset in different markets, a difference in price arises, which can be utilised for arbitrage trading.