Arbitrage Basics: Triangular Arbitrage on Uniswap (With JS Examples)
Welcome to Arbitrage Basics
This blog post series covers the math, finance, and programming behind arbitrage trading. In this first post, we’ll walk through the basics and write a simple arbitrage script in JS. It won’t generate real profits, but understanding the fundamentals is key before building something that can.
The most basic kind of Arbitrage: Triangular Arbitrage
Triangular arbitrage exploits price discrepancies between three trading pairs to generate profits. Start with ETH, trade it for LINK, then LINK for SHIB, then SHIB back to ETH. If exchange rates are misaligned, you end up with more ETH than you started with. The profit comes from temporary price inefficiencies caused by large trades or slow arbitrage by other traders.