Triangular Trading Bots Explained: A Beginner’s Guide to Smart Arbitrage

What is a Triangular Arbitrage Bot? A triangular arbitrage bot is like a smart trader that spots small price differences between three currency pairs on the same exchange. It works by starting with one currency, swapping it for a second, then a third, and finally converting it back to the original—making a profit from the slight price variations along the way. Unlike basic arbitrage, which compares prices across different exchanges, this method works entirely within a single platform. How Do Triangular Trading Bots Work? A triangular arbitrage bot scans the market in real time and instantly spots profitable trading opportunities. It executes trades within milliseconds, ensuring you capitalize on even the slightest exchange rate inefficiencies before they disappear. 1. Identifying profitable trading cycles The bot continuously examines an exchange's order book for mismatches in conversion rates between three trading pairs. It determines if a conversion cycle will provide a ...