Risk
Avoiding false arbitrage signals
A false arbitrage signal is a price gap that looks profitable on a chart but is not realistically tradable. These signals are common in crypto because market data can be fragmented and exchange conditions change quickly.
The most common reason for a false signal is ignoring fees. Trading fees, withdrawal fees, funding costs, and spread costs can remove most of the apparent edge. Another common reason is low liquidity. If only a small amount is available at the advertised price, a larger trade may move the market against the trader.
Latency also matters. A signal seen now may not exist a few seconds later. For this reason, research dashboards should record timestamps and avoid treating old quotes as live opportunities.
Before trusting a signal, ask whether deposits and withdrawals are open, whether the order book supports the intended size, whether fees are included, and whether execution time is realistic.