Before Any Trade
Regardless of type, every arbitrage trade starts with the same three checks:
Is the net profit positive? After slippage, fees, funding, and withdrawal costs. Not the spread — the actual profit.
Can I execute both legs? D/W open for spot trades, sufficient margin for futures trades.
Is the order book deep enough for my size? If slippage eats more than 30% of the gross spread at my intended size, reduce the size or skip.
Type 1: Spot ↔ Spot
Buy token on Exchange A spot market, transfer it, sell on Exchange B spot market.
Keep capital on BOTH exchanges. When you see a spread: buy on A AND sell on B simultaneously from pre-positioned funds. Transfer to rebalance afterward. Capture the spread instantly with zero transfer risk.
Checking D/W status and networks before buying is covered in the deposit & withdrawal traps guide.
Type 2: Spot ↔ Futures
Buy on spot market, short on futures (or vice versa). The profit comes from the price difference between spot and futures.
If you're short futures and funding is positive — you're getting paid to hold. If funding is negative — you're paying. Recalculate if it's still worth holding.
At 5x leverage, a 20% price move against your short means liquidation. The exchange doesn't know about your spot hedge on another exchange. Keep margin healthy.
Type 3: Futures ↔ Futures
Long on one exchange's perpetual futures, short on another's. Same token, different prices. Delta-neutral position.
Remember: your hedge is on a DIFFERENT exchange. If one leg gets liquidated, you still have the other position open and unhedged. Use conservative leverage — the math is in the 5x rule.
The full leverage and margin math is in the 5x rule, and the delta-neutral mechanics in the hedging guide.
Type 4: Spot ↔ DEX
Buy on CEX spot market and sell on a DEX (or vice versa). Requires a wallet with gas tokens for the DEX's chain.
AMM pools show "Total Value Locked" (TVL). Higher TVL = deeper liquidity = less slippage. But TVL alone isn't enough — check the actual price impact for your trade size.
Bots on Ethereum can see your pending transaction and front-run it — buying before you, pushing the price up, then selling after you buy. Use MEV protection (Flashbots on Ethereum, Jito on Solana) or set tight slippage tolerance.
Type 5: Futures ↔ DEX
Long/short on CEX futures, opposite position on DEX perpetual protocol (Hyperliquid, Aster, etc.). The newest and least competitive type.
Choosing the Right Type
→ Spot-Spot (but need to transfer) or add funds to a second exchange first
→ Spot-Futures or Futures-Futures — no transfer needed, faster execution
→ Spot-DEX — good for larger spreads but slower execution
→ Futures-DEX — newest and least competitive, bigger spreads
Regardless of type: calculate your ACTUAL profit after ALL costs before executing. Not the spread. The profit. If that number is positive — go. If it's negative or barely positive — skip.
The foundation under all five types: how exchanges work — order books, fees, and liquidity.
FAQ
Which arbitrage type is best for a beginner?
It depends on where your funds sit: two CEXs — Spot-Futures or Futures-Futures (no transfer, faster execution); wallet plus CEX — Spot-DEX for bigger spreads but slower execution.
What does every arbitrage trade start with?
Three checks: net profit positive after all costs, both legs executable (D/W open or margin sufficient), and the book deep enough for your size — if slippage eats more than 30% of the gross spread, cut size or skip.
What leverage is acceptable for futures-futures arbitrage?
2x is very safe (liquidation at a ~50% move), 3x is safe (~33%), 5x is the recommended maximum (~20%). Above 5x, liquidation risk is too high for the targeted arbitrage profit.
How do DEX-type executions differ from CEX types?
DEX types add gas, on-chain confirmation time, MEV/front-running, and AMM slippage: check the actual price impact for your size, not just the pool TVL.