What Are the Advantages of Using Limit Orders over Market Orders in Arbitrage Trading?

The main advantage of using limit orders over market orders in arbitrage trading is that they guarantee a specific execution price. This is crucial for arbitrageurs, as their profits depend on exploiting small price differences.

A market order, on the other hand, is executed at the best available price, which can be subject to slippage, especially in volatile markets or on low-liquidity exchanges. By using a limit order, an arbitrageur can ensure that their trade is only executed at a price that is profitable for them, thereby mitigating the risk of slippage and protecting their profit margins.