Basic Tips for Crypto Arbitrage Auto Trading
Following, we are giving you a few configuration examples to help you see how can it be the Auto Trading for Crypto Arbitrage set up. A brief reminder, this service takes advantage of the arbitrage opportunities that appear on the market due to the different cryptocurrencies prices between exchanges. Auto Trading is designed to work with cryptocurrencies (BTC, ETH, LTC...) against a stable coin, that will be USD or USDT depending on the exchange. USDT on Binance, Poloniex, OKEX, HitBTC and Huobi. USD on Kraken and Bitstamp.
Starting with the most basic configuration. Two exchanges, one asset (ETH) to trade against USD(T).
We have the following USD(T) and ETH distribution between Exchange A and Exchange B.
ETH Price is higher in Exchange B. That means that Auto Trading bot is buying on Exchange A and selling in the Exchange B.
We've considered that: ETH price is 90$, trade amount is set up at 180$ (2 ETH), and the minimum arbitrage profit is set up at 0,90%.
Now, a 2% difference appears, the Auto Trading bot instantly proceeds with the transaction. As you can see on the following table, it buys 2 ETH on the Exchange A at 88,2$. At the same time, it is selling 2 ETH on the Exchange B at 90$/ETH. A 2% difference between exchanges. This gives us a 3,6$ profit. In the third row, the fees, we've considered a 0,25% which represents a 0,89$ cost, we subtract them and it results that this single trade has given us a 2,71$ profit.
If we check the Funds distribution after the trade, we will see how the balances have changed after the trade.
Now, we have the same amount of ETH (40), but our dollars funds have increased, from $5.000 to $5.002,71.
Funds distribution recommendations
Now that you have learnt how it works, we are giving you some more possible funds distribution or strategies to follow to get profit.
This first strategy is the one that we have used to explain the Auto Trading bot performance. It is the most basic one. Two exchanges, one Cryptocurrency and USD(T) with similar amounts in both, to wait for possible arbitrage opportunities in both exchanges. Notice that with this distribution, there will be few arbitrage opportunities.
The second one is adding two more exchanges, we do not recommend more than 4 exchanges at the same time. This distribution increases the possibility of finding more arbitrage opportunities, but you will have to reduce the trade amount since the total capital is spread to more exchanges.
Another possible funds distribution, instead of adding more exchanges, we focus on adding more Cryptocurrencies against USD(T). You don't need to spread funds between more exchanges, and you are also increasing your possibility of finding new trades holding your other favourite Cryptocurrencies. Note: We recommend having the amount equivalent to all the cryptos in USD(T) since you always need USD(T) to execute the trades. So the amount should always be greater, so you can execute more trades against all the cryptos without having to make as many moves between exchanges.
The last options. If we know that one exchange is always at a lower price than another one. Like in this sample, in the Exchange A we only need USD(T) there to buy because ETH price is always lower than Exchange B and C. Then, we only need cryptocurrency in the other exchanges to sell. In this way, we can increase trade amount because we focus our funds on expected arbitrage opportunity.