What Is Arbitrage Trading?
Arbitrage trading is considered a risk-free trade. Do you know the arbitrage definition? If not, then this article is for you. In this article, I will give you insights into what arbitrage trading is.
Let’s find out what arbitrage trading is.
Arbitrage trading is the process of buying and selling concurrently to earn a profit. For example, there are two different markets in your city. In market X, the price of mango is 10 dollars per kg. And in market Y, the price of mango is 18 dollars per kg. So you buy mangoes from market X and sell those mangoes at market Y. And your profit is $8. The whole process is called arbitrage.
Another example of arbitrage in online marketing is if you buy a watch from Alibaba for $100 and then sell it on Amazon for $140. You earn $40 without taking any risk. That is why arbitrage is often known as risk-free trading.
What Is Arbitrage Trading in Crypto?
Crypto arbitrage means buying crypto from one crypto marketplace and selling it to another crypto marketplace at a high profit. The liquidity varies between crypto marketplaces. The price of crypto in one crypto marketplace can be lower than in another crypto marketplace.
Traders call it a risk-free trade because you are not taking any potential risk. You are just finding an opportunity where the price is low. Then you buy it from there and sell it to another crypto marketplace where the price is high.
For example, if you buy $45,000 in bitcoins from Binance and sell them for $45,005 on Coinbase, So you can earn a $5 profit with this process.
What Is Drop Servicing?
Drop-shipping is the process of selling digital services through outsourcing. For example, your company provides digital marketing services. And you have a customer who will give you $100 for content writing services. So you hire a freelancer for $50 to write that content. And when you hand over the content to your customer for $100, you will get a $50 profit.
What is dropshipping?
Dropshipping is the process where the seller sells the products of others to the customer through his own online store.
For example, you have a website or online store. But you don't have your own products. So you contact a manufacturer, and you buy the products from the manufacturer. Then you sell that product to a customer.
Another example, your online store name is A, and you sell shoes. So you display images of shoes in your shop that your customers can order. But you actually don't own those shoes. You order shoes from a third-party manufacturer, and they deliver the shoes to your customers. And the amazing thing is that your customers don’t even know that they buy from third parties. They know that they buy from you directly.
The relationship between arbitrage,drop shipping, and dropshipping
Drop service and drop shipping are basically based on the model of arbitrage. Drop-servicing refers to a service that involves freelancers. And dropshipping is related to products that depend on other third parties like manufacturers and wholesalers.
In a nutshell, we can say that arbitrage is the process of buying a product and selling it at a higher price to earn profit. I tried to give you an idea of what arbitrage trading is. Is it helpful for you? Do you want to try arbitrage trading? Share your opinion in the comment section.