Arb (short for arbitrage) is a trading strategy that takes advantage of price disparities between different markets or assets. It involves buying an asset on one market and simultaneously selling it on another, profiting from the difference in prices. In cryptocurrency markets, this usually means taking advantage of pricing differences across exchanges by using both spot and derivatives markets to trade cryptocurrencies at different prices.
The primary benefit of arbing is that it can be profitable even when overall market conditions are unfavorable due to its ability to capitalize on small discrepancies in prices. One downside is that it requires significant capital as well as monitoring multiple exchanges with fast execution times; if either fails, then profits may not materialize despite successful trades being placed. Moreover, some platforms charge higher fees than others so traders must factor those costs into their calculations before executing any trades.
Finally, while arb strategies have traditionally been used by professional traders they can also be employed successfully by retail investors provided they do their research ahead of time and understand how these strategies work before placing any orders in the real world marketplace .
