What is a Triangular Arbitrage bot and How does it work?

[aanaethan]

A triangular arbitrage bot is an automated trading system that uses price disparities between three currency pairings on the same exchange to create risk-free profits. It uses a three-step trading cycle to change one asset into another and then back to the original asset, profiting from price inefficiencies.

How It Works:

A triangular arbitrage bot exploits minor price differences between three currency pairings on the same exchange. It uses a three-step trading cycle to generate profit without relying on market trends.

• Detects price discrepancies - The bot constantly monitors the exchange rates of multiple trade pairs to detect price discrepancies. It looks for scenarios where converting indirectly yields a higher rate than straight conversion.
• Calculates profitability - Ensures that executing all three trades will result in a net gain after fees.
• Executes trades quickly - Completes all three transactions in milliseconds, locking in profits before the market corrects itself.