Arbitrage: the simultaneous buying and selling of securities, currency and commodities in different markets or in derivative forms in order to take
advantage of different prices for the same asset.
Why Arbitrage opportunities exist in the crypto market:
Not trading arbitrage
#1 Lots of dumb money continues flow in
#2 Fractured market with many exchanges
#3 Distrust of keeping money on exchanges: "lose people's money frequently"
#4 During a price spike it's difficult to get money to the exchange quickly from hardware wallet
#5 Large wall street players not allowed to use client money for arbitrage due to regulation
#6 Documentation for trading bots hard to use
Traditional arbitrage is supposed to involve 0 risk, so you're buying on cheaper exchange and selling on expensive exchange instantly and move security over. But that isn't the case... the closest thing with less risk is if you know how to code and develop arbitrage bot which at the same time is capable of "short" coin & buying in another. That would be closest method how to lower risk.
*Remember there is High RISK involved if you simple buy and send to another exchange.
If you do so make sure:
Percentage difference is high enought (3/5 % ++)
Arbitrage large Market cap coins vs. small Market cap coins
* Large market cap coins are more liquid, less volatile, and on more exchanges
* Smaller market cap coins will have larger spreads but are far more volatile, illiquid, less exchanges
* You can try to trade either way forexample if you're holding coins long term anyway and dont mind moving them between exchanges for small profit.