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I am really impressed by the project you are working on, using short selling is definitely a good idea to avoid fund transfer between exchanges (and the associated fees that would make arbitrage unprofitable).
But I have a few questions regarding how you tackle the inner risks of short selling. First of all, the potential loss while using short selling is (theoretically) infinite since the price has not an upper bound. Of course, since you are also buying, the winning would be as important as the loss. But this is true only if you strategy is perfectly market neutral, in other words: ONLY IF YOU BUY EXACTLY AT THE SAME TIME AS YOU SHORT SELL WITH EXACTLY THE SAME AMOUNT OF BTC. Your algorithm probably does not guarantee these two points so my question is did you try to assess the delay between short selling and buying? Did you assess the gap between them (in terms of btc amount)?
My second question is: you advise to use only small amounts to begin arbitraging (which is clearly prudent if we do not want to be ruined in a few minutes !). But if I run your algo, is my maximum loss really equal to my investment? Assume the algorithm goes crazy and order 1000btc for short selling! (The algo does need any money for that!) Assume the trend goes up... I could end up with 100000 dollars of debt due to the guys who borrowed me the btc even if I started to trade with 10$!!
How do you prevent this to happen, did you take this in account in your project or does the exchanges doing short selling prevent us from this event by rejecting too large short selling orders? If so what is the limit?
Thank you in advance for the clarification
