How to Use Arbitrage Software for Conducting Trades

Blockchain cannot cease amazing us: from comprehensive anti-counterfeit solutions to elaborate arbitrage trading bots.

As far as trading itself is concerned, it should be pointed out that traders use special software programs to discern arbitrage trading opportunities that they can benefit from for their potential profits. There exist three types of software programs that are widely used for arbitrage trading. They comprise automatic trading software programs, alert programs, and remote alert programs.

Arbitrage trading

Arbitrage trading is meant for looking for profit from temporary market inefficiencies that lead to the mispricing of one and the same asset in various markets or at different brokers. Thanks to arbitrage trading, it is possible to quickly correct these temporary inefficiencies in prices and bring them back in line across different markets and brokers.

The temporary imbalances in prices can also create opportunities for arbitrage trading that presents a trader with the opportunity to carry out simultaneous buy-and-sell trades. These trades normally comprise a small profit that is the result of variations in pricing.

Automatic arbitrage trading software

Given that arbitrage trading opportunities normally exist only for a very short period of time (just a few seconds sometimes), it poses a considerable challenge for traders to make arbitrage calculations on their own. That is why, traders prefer to resort to a number of arbitrage trading software programs that are perfectly capable of instantly identifying and calculating arbitrage opportunities.

One type of these software programs widely used by arbitrage traders is called automated trading software. This software is generally loaded onto a brokerage trading platform that belongs to a trader. It then immediately initiates the designated trades on behalf of the trader.
This program has been designed in such a way that it can deal with one of the greatest challenges of arbitrage trading — the timely and precise trade execution required to take advantage of trading opportunities that can last only for a few seconds.

Trade alert programs

Sometimes you can come across traders who are not satisfied with having their trades automatically carried out. Instead, they prefer to make all final and key trading decisions themselves and utilize special programs that are known as trade alert software.

Just like automatic arbitrage trading software, trade alert software continuously examines different markets, instruments, and brokers with the aim to detect arbitrage trading opportunities. Once it identifies an arbitrage opportunity, it sparks an alert of the opportunity to a trader, who then is responsible for making a decision about whether or not to conduct trades on this opportunity.

Remote alert programs

Instead of running their own software programs, some traders choose to subscribe to a remote alert service. The subscription to the service allows traders to receive alert signals that notify them about arbitrage trading opportunities. This method of receiving alerts partially coincides with the one that requires using their own software programs. The difference, however, is that these alert signals are produced by software that is installed in another location outside of the trader’s computer or network.

To recap, it is worth noting that arbitrage trading offers a lot of advantages and allows traders to conduct trades more efficiently and faster, which makes it increasingly popular among institutional traders as well as market traders. The whole process is driven by faster news sources, high-performance computers along with more advanced arbitrage software programs. And surely, there is no doubt that the process will be more elaborate in future.