Cryptocurrency trading is gaining root into our financial systems, and the truth is we have to embrace it. Although in the past cryptocurrency prices were not stable, the volatility of the coins like Bitcoin has come to stabilize. There are many ways you can make profits in the cryptocurrency market. One of the best methods currently in use is through arbitrage trading. Cryptocurrency arbitrage can be defined as the process of getting profits because of the differences between the two markets. In simple terms, it is the process of buying coins from one place and selling it to another place by carefully analyzing the price differences. There are many strategies for doing arbitrage trading in the crypto world. One of the methods of doing this is through Spatial Arbitrage.
Spatial arbitrage allows you to make trades or investment between two platforms. The process involves the cryptocurrency trader assuming a long and a short position. In purely economic terms, a long position is created when a buyer decides to invest or buy market security with the expectation that the prices will go up while a short position refers to the position taken by a seller who sells security expecting the market prices to go down. This concept applies to Spatial arbitrage which practically means buying coins between two different platforms. A buying trade is executed when the coins are at a lower cost in a given platform then sold at another platform which has a higher price making the investment to result in profits.
A trader, therefore, carries out a long position as the trend goes by but at the same time, an investor will create a short order in a different platform that will automatically counter the incoming change of the coin prices. By doing this, a trader can hedge against cryptocurrency fluctuations but at the same time be in a position to be open for other market trends.
To effectively carry out a spatial arbitrage trade you need to have quality knowledge about the different market platforms by carefully understanding the liquidity and the size of the markets. The first step in spatial arbitrage, therefore, involves finding a suitable trading opportunity for your coin. You have to select the exchanges that show the highest level of disparities. After deciding on this, the next step is to execute the trade immediately since others too are on the lookout for these opportunities. It is good to balance your account after the trade to determine the profitability level. You have to take note of the trading fees. When the profits are so low, you might end up getting nothing due to the trading fees.
• Price volatility and fluctuation can lead to unwanted expectations.
• Quick price changes during the process while the arbitrage trading process takes long which can result in losses.
• The trading fees can water down the profits you make.
There are many strategies for arbitrage trading, and Spatial Arbitrage provides the perfect opportunity for you to make profits. The volatility of the coins provides the perfect chance for you to make profits, but the constant fluctuations if not well mastered can lead to losses. Traders who are new in this market must take time to learn the different platforms and price movements before executing trades.