The strategy of taking advantage of price discrepancies of the same asset across different markets. Traders buy the asset at a lower price in one market and simultaneously sell it at a higher price in another. This is common in Forex, Crypto, and Commodity markets, especially across exchanges with varied liquidity. While technology and high-frequency trading have made arbitrage opportunities fleeting, they still exist, particularly in less regulated or slower markets. Efficient arbitrage contributes to price equilibrium across markets and is a crucial mechanism for maintaining market efficiency.
Example:
A trader buys shares of a dual-listed company on one exchange at a lower price and simultaneously sells them on another exchange where they trade slightly higher, capturing the price difference.
