What is Arbitrage in trading?

Arbitrage is the technique of hand in hand buying and selling of assets from various platforms, locations or exchanges with the sole purpose of earning from the price difference which is usually very less in percentage terms. The elementary rule of arbitrage trading is that the quantity of underlying asset purchased and sold should be equal. It is only the difference in prices which is captured as the net payoff of the entire trade. The latter amount should be reasonably higher than costs incurred in facilitating the trade i.e. transaction costs.

There are not many opportunities for arbitrage trading as it has been bypassed by the algorithm trading in mature markets.

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