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Triangular Arbitrage Meaning

Triangular arbitrage is a trading strategy used in foreign exchange and cryptocurrency markets that takes advantage of discrepancies in exchange rates among three different currency pairs. The trader simultaneously executes three trades: converting one currency to a second, the second to a third, and the third back to the original currency.

If the product of the exchange rates is greater than one (taking into account transaction fees), a risk-free profit can be captured. This strategy relies on precise, automated execution because opportunities arise and disappear within milliseconds.

In the crypto space, triangular arbitrage might involve trading between BTC/USDT, ETH/USDT, and ETH/BTC pairs on a single exchange or across multiple exchanges. While triangular arbitrage can be profitable, traders must consider transaction fees, slippage, and the operational complexity of coordinating multiple trades quickly.

High-frequency trading firms often employ algorithms to detect and exploit these fleeting price imbalances.

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Finery Markets BVI Limited (“Finery Markets”) provides software, technology infrastructure, and related Information and Communication Technology (ICT) services on a Software-as-a-Service (“SaaS”) basis. Finery Markets acts solely as a software vendor and does not operate a trading platform, does not intermediate, match, execute, clear, or settle transactions, and does not engage in any activities that would require regulatory authorisation under applicable laws.

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