You would definitely be able to get some arbitrage opportunities and that may tempt you to trade them. However, this is absolutely impossible because there are many big traders who use automated software to spot these arbitrage opportunities and trade them. As a retail trader, it would not be possible to match the speed of the software.

The other reason is that when you trade through a broker, the broker comes in between you and the exchange. The big players, however, deal with the exchange directly and they do not have any broker in between them. This will eat into your profits and thus these lets the big player’s spot and make use of the arbitrage positions much faster than a retail trader. The big traders would be able to spot the arbitrage position faster and this gives them an added advantage over any retail trader.

Some thoughts

Make sure that you do not be an arbitrage trader in the stocks that are of low volume. This is because it is difficult to trade in them.

If the markets were totally efficient then an arbitrage trade would have never come up in the first place. But this is not true and the markets are imperfect. But make sure to understand that even if there is any pricing discrepancy between the same goods this is not always the scope for an arbitrage position.

Also, make sure that you keep in mind the transaction costs to take a trade. If the fees to take a trade are higher, then this would eat up into the arbitrage profits and sometimes even end up in a losing trade.

Big firms are able to benefit from an arbitrage position

The large institutions are able to make use and participate in the arbitrage positions. Continue reading on this. This is because the hedge funds trade in large quantities of shares and them can thus profit even if the spread between the prices is not that huge.

The retail investors do not have such huge quantities of money to trade in and they thus miss out on the arbitrage opportunities. The fees and other brokerage costs eat up the profits. This is something that the institutional traders do not have to worry about.

The main reason for an arbitrage position being created was because of the lack of any real-time communication about what happens in the market. However, because of technology and the super-fast speed of data collection, the arbitrage positions are still lesser these days.