Arbitrage trading is considered risk-free trade. Do you know the arbitrage definition? If not, then this article is for you. In this article, we will give you insights into What Is Arbitrage Trading
Let’s find out What Is Arbitrage Trading
Arbitrage trading is a process of buying and selling concurrently to earn profit. For example, there are two different markets in your city. In market X the price of mango is 10$ per kg. And in market Y the price of mango is 18$ 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 you sell this watch on Amazon for $140. You earn $40 profit without taking any risk. That is why arbitrage is often known as risk-free trade.
What Is Arbitrage Trading In Crypto
Crypto arbitrage means buying crypto from one crypto marketplace and selling crypto 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 from there and sell it to another crypto marketplace where the price is high.
What Is Drop Servicing
Drop servicing is the process of selling digital services with the use of outsourcing. For example, your company provides digital marketing services. And you have a customer who will give you $100 for content writing service. So you hire a freelancer with $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 product of others to the customer with the use of 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.
For example, your online store name is A and you sell shoes. So you display images of shoes in your shop which your customers can order. But you actually don’t own tat shoes. You order shoes from a third-party manufacturer and they deliver the shoes to your customers. And the amazing thing is your customer won’t even know that they buy from third parties. They know that they buy from you directly.
The relationship between arbitrage, drop servicing and dropshipping
Drop servicing and drop shipping is basically based on the model of arbitrage. Drop servicing is related to service which involves freelancers. And drop shipping is related to products that depend on other third parties like manufacturers, and wholesalers.
In a nutshell, we can say Arbitrage is the process of buying a product and selling it at a higher price to earn a profit. We tried to give you an idea about what is arbitrage trading. Is it helpful for you? Do you want to try arbitrage trading? Share your opinion in the comment section. Stay connected with us to read more informative articles like this.