Perhaps you have been dealing with the topic of investments for some time and have come across the term arbitrage, which has been adopted directly from French into German. It comes from financial management. In this article, you will find out exactly what arbitrage is and how it works.<\/p>\n\n\n\n
The term dates back to the 14th century. In Italy, traders tried to buy goods cheaply in order to sell them elsewhere for a higher price. This method of making a profit by buying and selling became widespread in Europe. <\/p>\n\n\n\n
Basically, the word arbitrage covers transactions that can generate profit through differences. The aim of this strategy is to, exploit short-term differences<\/strong>to be able to profit from it. Profit can be made through the following differences:<\/p>\n\n\n\n This trading strategy is considered low risk<\/strong>. Arbitrage is used for different asset classes such as Cryptocurrencies<\/a>the purchase of Stocks<\/a>, ETFs<\/a>, Bonds<\/a>, Foreign exchange<\/a> or futures transactions. For example, investors try to buy a share at a low price when the price falls and can sell it at a higher price on another trading venue. <\/p>\n\n\n\n A concrete example will illustrate the importance of the strategy. A trader could buy a share on the Frankfurt Stock Exchange at a price of 41.20 euros. Within a very short time, he could sell the same share on the Hamburg stock exchange at a price of 41.25 euros. In this way, the trader could make a profit of 5 cents within a few seconds.<\/p>\n\n\n\n One fact that is exploited in arbitrage trading is the Inefficiency of the markets<\/strong>. Securities or assets have different prices depending on where they are traded, even though they are the same assets. In this way, securities can be bought cheaply at one trading venue and sold expensively at another.<\/p>\n\n\n\n As the example above shows, such transactions are only worthwhile with high capital investment<\/strong>. With low investment sums, the price differences are comparatively small and cannot justify the time required for the strategy. <\/p>\n\n\n\n It is also important that traders act quickly. This trading strategy is characterized by the fact that securities are sold again within a few seconds. Price differences can be realized with high speed<\/strong> and should therefore be exploited quickly. <\/p>\n\n\n\n Today's modern IT infrastructures ensure that price differences have become rarer. With this strategy, possible Fees <\/strong>which could further reduce the return on small investments. <\/p>\n\n\n\n For an arbitrage transaction to be successful, it must have the following Conditions <\/strong>fulfill:<\/p>\n\n\n\n In arbitrage transactions Short sales <\/strong>are included. A short sale is a transaction in which a security is sold that is not owned by the investor. The seller is assured that the security will be in his possession at a certain point in time. <\/p>\n\n\n\n At first glance, they look similar Speculation <\/strong>and Arbitrage<\/strong>However, the two strategies are very different from each other. Speculation is a strategy with the aim of correctly predicting price changes. predict and exploit<\/strong>. Here you will find a clear table showing the differences in more detail:<\/p>\n\n\n\n There are different types of arbitrage that exploit various market differences. Below you will find a selection, including the meaning. <\/p>\n\n\n\n Traders use arbitrage transactions to try to make profits by trading at different prices, interest rates and exchange rates. Short-term differences<\/strong> of various stock exchanges are exploited. <\/p>\n\n\n\n The strategy is considered low-risk <\/strong>and is characterized by very fast buying and selling. This takes place almost simultaneously and assets are only held for a few seconds. Numerous assets are suitable for this financial strategy, such as shares, ETFs, foreign exchange or bonds. <\/p>\n\n\n\n The inefficiency of the markets is exploited. In general, the strategy requires a high capital investment<\/strong>to make worthwhile profits. When buying and selling shares, it is usually only possible to make a few cents. <\/p>\n\n\n\n For arbitrage trading to work, the product must be homogeneous and fungible, the price or rate difference must be as large as possible and the asset must be traded on different markets. <\/p>","protected":false},"author":20,"featured_media":0,"template":"","class_list":["post-45324","glossar","type-glossar","status-publish","hentry"],"acf":{"blog_summary":"","blog_faq_schalter":"nein","faq_uberschrift":"","blog_faq_loop":null},"_links":{"self":[{"href":"https:\/\/www.captrader.com\/en\/wp-json\/wp\/v2\/glossar\/45324","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.captrader.com\/en\/wp-json\/wp\/v2\/glossar"}],"about":[{"href":"https:\/\/www.captrader.com\/en\/wp-json\/wp\/v2\/types\/glossar"}],"author":[{"embeddable":true,"href":"https:\/\/www.captrader.com\/en\/wp-json\/wp\/v2\/users\/20"}],"wp:attachment":[{"href":"https:\/\/www.captrader.com\/en\/wp-json\/wp\/v2\/media?parent=45324"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n
Arbitrage trading - background, conditions and differentiation<\/h2>\n\n\n\n
\n
Arbitrage<\/strong><\/td> Speculation<\/strong><\/td><\/tr> Profits rather low<\/td> High profits are possible<\/td><\/tr> Strategy is considered low-risk<\/td> Strategy is considered risky<\/td><\/tr> Form of security provided by buying and selling at high speed<\/td> There is speculation on possible profits<\/td><\/tr> High investments are necessary for high profits<\/td> High profits are possible even with small investments<\/td><\/tr> Opportunity to make an easy profit<\/td> Difficult to predict chances of winning<\/td><\/tr> Interest rate, price or exchange rate differences are exploited<\/td> There is speculation on price increases<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n These arbitrage types exist<\/h2>\n\n\n\n
\n
Conclusion: How does arbitrage work?<\/h2>\n\n\n\n