What Is the Difference between Speculative and Arbitrage Trading Strategies?

Speculative trading involves taking on risk in anticipation of a future price movement to make a profit, essentially betting on the direction of the market. Arbitrage, conversely, is a risk-free or low-risk strategy that exploits momentary price discrepancies of the same asset across different markets or exchanges.

Arbitrage profits are small but reliable, while speculation offers high potential but high risk.