Exploit price differences across exchanges for risk-free profit.
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Overview
Arbitrage is the practice of simultaneously buying and selling the same asset (or economically equivalent assets) in different markets to profit from a price discrepancy. In theory, it is risk-free β if Bitcoin is priced at $50,000 on Exchange A and $50,100 on Exchange B, buying on A and selling on B locks in a $100 profit per coin.
In practice, execution costs (trading fees, withdrawal fees, and funding costs), transfer latency, and the speed at which other arbitrageurs close the gap mean that opportunities are fleeting and margins thin. This makes automation essential: a bot can monitor dozens of exchange pairs simultaneously and execute in milliseconds.
Several types of arbitrage exist in crypto markets. Simple cross-exchange arbitrage exploits price differences for the same pair across venues. Triangular arbitrage exploits inefficiencies in exchange rates between three currency pairs on the same exchange (e.g., BTCβETHβUSDTβBTC). Funding rate arbitrage exploits the periodic funding payments on perpetual futures: when funding is positive, traders short the perpetual and long the spot, collecting the funding rate as income.
The strategy is most effective during periods of high market volatility when price discrepancies widen, or in less liquid markets where fewer participants can close gaps quickly.
Strategy Code
This is a TradingView Pine Script strategy example for this page concept. Paste it into the TradingView Pine Editor, add it to your chart, and run it in the Strategy Tester.
//@version=6
strategy("Arbitrage Strategy", overlay=true)
fastLen = input.int(20, "Fast Length")
slowLen = input.int(50, "Slow Length")
fast = ta.ema(close, fastLen)This is a thinkorswim ThinkScript strategy example for this page concept. Open thinkorswim, create a custom strategy, paste the script, and apply it to your chart.
def fast = ExpAverage(close, 13);
def slow = ExpAverage(close, 34);
def rsi = RSI(length = 14);
def buySignal = fast > slow and rsi < 65;
def sellSignal = fast < slow or rsi > 75;Join thousands of traders who use auto-Trading to execute this strategy automatically, 24/7.
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