Arbitrage trading is a strategy that takes advantage of price differences in different markets or forms of a financial asset. The concept is simple: traders simultaneously buy and sell an asset in two or more markets to exploit price discrepancies, locking in a risk-free profit.

For example, if a stock is priced lower on one exchange than on another, an arbitrageur would buy the stock on the cheaper exchange and sell it on the more expensive one. This results in an immediate profit from the price difference, minus transaction costs.

Arbitrage opportunities are generally short-lived because the buying and selling activity quickly balances the price gap between markets. It's typically executed by high-frequency traders or firms using sophisticated algorithms and technology to detect and capitalize on these discrepancies before they disappear.

While arbitrage is considered low-risk, it's not entirely without risks. Factors like transaction costs, execution time lags, or currency conversion rates can impact profitability. Additionally, arbitrage opportunities have become harder to find in highly liquid and efficient markets due to the presence of advanced trading systems.

Arbitrage plays a crucial role in maintaining market efficiency by ensuring prices don't deviate significantly across different platforms or regions.