What is Spot Arbitrage? Complete Guide to Cross-Exchange Trading
Master the fundamentals of spot arbitrage — the strategy of buying crypto on one exchange and selling on another for instant profit. Includes step-by-step execution, fee calculations, and real examples.
Reading time: 10 minutes • Last updated: January 2026
Important Disclaimer
This content is for educational purposes only and does not constitute financial, investment, or trading advice. Cryptocurrency arbitrage involves significant risks including potential loss of capital. Always conduct your own research and consult with qualified financial advisors before trading.
What is Spot Arbitrage?
Spot arbitrage (also called cross-exchange arbitrage or spatial arbitrage) is a trading strategy where you buy a cryptocurrency on one exchange at a lower price and simultaneously sell it on another exchange at a higher price. The price difference, minus trading fees, becomes your profit.
Unlike derivatives trading, spot arbitrage deals with actual cryptocurrency assets — you own the coins during the transaction. This makes it one of the most straightforward arbitrage strategies available.
Why Do Price Differences Exist?
Crypto markets are fragmented across hundreds of exchanges worldwide. Unlike traditional stock markets with centralized pricing, each crypto exchange operates independently, creating natural price discrepancies:
- Supply & Demand Imbalances: Different user bases create varying buy/sell pressure on each exchange
- Liquidity Variations: Smaller exchanges have wider spreads and more volatile prices
- Geographic Factors: Regional exchanges may have premium pricing due to local demand or regulations
- Latency: Price updates don't propagate instantly — arbitrage bots constantly work to close these gaps
- Deposit/Withdrawal Delays: When an exchange has slow withdrawals, prices can diverge significantly
- News & Volatility: During high-volatility events, price gaps widen as exchanges update at different speeds
Types of Spot Arbitrage Strategies
1. Simple Cross-Exchange Arbitrage
The most straightforward approach: buy on one exchange, sell on another. Best for beginners.
- Pre-fund both Exchange A (with USDT) and Exchange B (with the target crypto)
- When a price gap appears, buy on the cheaper exchange
- Simultaneously sell on the more expensive exchange
- Rebalance funds periodically between exchanges
2. Triangular Arbitrage
Exploit price inefficiencies between three trading pairs on the same exchange. No transfers required, but opportunities are rarer and close faster.
- Start with 10,000 USDT
- Buy BTC with USDT (BTC/USDT pair)
- Buy ETH with BTC (ETH/BTC pair)
- Sell ETH for USDT (ETH/USDT pair)
- If pricing is inefficient, end with >10,000 USDT
3. DEX-CEX Arbitrage
Compare prices between decentralized exchanges (Uniswap, PancakeSwap) and centralized exchanges (Binance, Coinbase). DEXs use automated market makers (AMMs) that can create larger price discrepancies, especially for smaller tokens.
Step-by-Step: How to Execute Spot Arbitrage
Follow this process to execute your first spot arbitrage trade:
Set Up & Fund Multiple Exchanges
Create verified accounts on 3-5 exchanges. Distribute capital across them — keep USDT on some, target crypto on others. This eliminates transfer delays during trades.
Monitor Price Differences in Real-Time
Use an arbitrage scanner to track prices across exchanges. Look for spreads of at least 0.5-1% to cover fees. Our live spot tracker shows real-time opportunities across 12+ exchanges.
Calculate Net Profit Before Executing
Factor in ALL costs: maker/taker fees on both exchanges, potential slippage, and any withdrawal fees if rebalancing. Only proceed if net profit is positive. Use our arbitrage calculator to run the numbers quickly.
Execute Both Trades Simultaneously
Speed is critical. Execute the buy and sell orders as close together as possible. Use limit orders slightly above/below market for guaranteed fills, or market orders for maximum speed.
Rebalance & Repeat
After trades, your capital is now distributed differently. Periodically transfer funds between exchanges during low-opportunity periods to stay ready for the next trade.
Calculating Spot Arbitrage Profits
The key to profitable spot arbitrage is accurate fee calculation. Here's a breakdown:
| Cost Type | Typical Range | Example (10 ETH trade) |
|---|---|---|
| Buy-side trading fee | 0.05% - 0.1% | $32 (0.1% of $32,000) |
| Sell-side trading fee | 0.05% - 0.1% | $32 (0.1% of $32,350) |
| Slippage (estimated) | 0.05% - 0.2% | $32 (0.1%) |
| Total Costs | 0.15% - 0.4% | $96 |
Example: ($3,235 - $3,200) × 10 - $96 = $350 - $96 = $254 profit
Key Success Factors
Speed is Everything
Arbitrage gaps close within seconds. Professional traders use bots and API connections. Manual traders should focus on larger, more stable opportunities.
Pre-Fund Exchanges
Never rely on transfers during a trade. Keep capital distributed across exchanges so you can execute instantly when opportunities appear.
Check Liquidity First
A 2% price gap means nothing if there's only $100 in the order book. Always verify sufficient volume exists to execute your planned trade size.
Beware "Too Good" Opportunities
Spreads over 5% often indicate problems: frozen withdrawals, delisting announcements, or exchange issues. Investigate before trading.
Risks & Considerations
While spot arbitrage is considered lower-risk than directional trading, these factors can turn profits into losses:
- Execution Risk: Price moves against you between placing the buy and sell orders
- Slippage: Large orders move the market, reducing your actual spread
- Exchange Downtime: One exchange goes offline during your trade
- Withdrawal Freezes: Unexpected withdrawal restrictions trap your funds
- Fee Changes: Exchanges can change fee structures without warning
For comprehensive risk mitigation strategies, see our Risk Management Guide.
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