A triangular arbitrageur spots market irregularities and carries out concurrent trades across three asset pairs while skillfully controlling risk.
Triangular arbitrage, a trading strategy used by traders in stock markets and forex, is being successfully employed by cryptocurrency traders. It allows traders to profit from price differences of digital assets across various platforms. While it is a complex strategy requiring a sophisticated skill set, the use of bots simplifies the process.
This article explains what is arbitrage and triangular arbitrage are, the use of bots for triangular arbitrage, the benefits of triangular arbitrage, the risks of triangular arbitrage and the potential evolution of triangular arbitrage in the digital realm.
Arbitrage is a financial strategy where traders simultaneously buy and sell the same digital asset on different platforms to profit from price discrepancies. Market inefficiencies and varying demand-supply dynamics create these price discrepancies for the same assets across different platforms. For instance, the cost of Polygon’s MATIC (MATIC) may slightly differ on Uniswap and PancakeSwap.
