Arbitrage is often called low-risk, but low-risk is not risk-free. Prices move, orders partially fill, funding changes and exchanges pause. Risk management is assuming something can go wrong and sizing the trade so the account survives it.
Why arbitrage is not risk-free
The main danger is assuming a visible spread can be captured exactly.
Position sizing and leverage
A good setup starts with small size, low leverage and enough balance on both exchanges.
Operational and funding risk
Exchanges go into maintenance, APIs fail, coins get delisted and funding can change right before payment.
When to skip a trade
The best trade is not the biggest screenshot percentage; it is the one with clean execution and controlled downside.
The main danger is assuming a visible spread can be captured exactly. In reality one leg can fill while the other fails, funding can change, and liquidity can vanish. Treat every setup as something that can go wrong.
A good setup starts with small size, low leverage and enough balance on both exchanges. Leverage magnifies both edge and risk, so it should leave clear distance from liquidation on each leg.
Exchanges go into maintenance, APIs fail, coins get delisted and funding can change right before payment. These are not rare edge cases in crypto, so plan for them before entering.
The best trade is not the biggest screenshot percentage; it is the one with clean execution and controlled downside. Avoid illiquid pairs, excessive leverage and spreads that appear only for a few seconds.
Run every setup through the same risk gate before you commit capital.
It can be lower risk than directional trading, but it is not risk-free. Execution, funding, liquidity and exchange issues can all turn a clean-looking spread into a loss.
Only enough that a temporary divergence between the legs cannot liquidate you. The safest setups keep leverage low and size small.
Know your exit before you enter. If you cannot describe how you would close the trade under stress, do not open it.
Education / Mistakes
Avoid the most common mistakes: ignoring fees, chasing illiquid spreads, entering too late, using too much leverage, and trusting raw percentages.
ReadChecklist / Funding
A practical pre-trade checklist for funding arbitrage: funding direction, next payment time, liquidity, spread, fees, leverage, and exit plan.
ReadFees / Net profit
Understand the costs that decide whether an arbitrage trade is real: maker fees, taker fees, funding payments, withdrawal fees, and hidden execution costs.
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