What is Arbitrage? - Definition & Explanation

Definition

A strategy that exploits price differences between markets or brokers.

Arbitrage Explained

Arbitrage is a trading strategy that takes advantage of price discrepancies for the same asset in different markets or brokers, buying low in one place and selling high in another to lock in risk-free profit. True arbitrage opportunities in modern forex markets are extremely rare and short-lived.

Related Terms

Spread

The difference between the bid and ask price, representing the broker's primary cost to the trader.

ECN (Electronic Communication Network)

A system that matches buy and sell orders directly between market participants.

Arbitrage - Frequently Asked Questions

It's extremely difficult. Arbitrage opportunities are rare, short-lived, and typically exploited by institutional algorithms.

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