How cryptocurrency arbitrage works

[TradePatio]

The screenshot below shows the story of how TradePatio bot of Passive Arbitrage had fun at night chasing Tezos (XTZ) between exchanges on our test accounts (when you’re reading the table from the screenshot - do it from the bottom line to top):



That is, it did not deposit / withdraw coins in the literal sense. It bought where it was profitable, then sold and moved to another place, and so on. Generating, of course, profit at each step.

[avikz]

It's good to see a screenshot of trades that never happened. Can you please answer few questions?

1. Are trading fees factored in while calculating the profit?
2. What is the initial amount you have used for this demo trades?
3. Does it have the capability to control the trading accounts based on pre-defined currency pair?

Thanks,
Avikz

[TradePatio]

It's good to see a screenshot of trades that never happened.

Probably it is. Fortunately not in this case.

1. Are trading fees factored in while calculating the profit?

Good question - we just discussed with our developer team and looks like on this screen (Passive Arbitrage/Log) we've lost the fees calculation with one of our recent updates. So when the bot calculates its strategy - all fees will be calculated, but when it saves the result to log - it doesn't include the fees. This bug should be fixed today (I believe). So the deals were profitable, but the profit in my screenshot is a bit incorrect.

2. What is the initial amount you have used for this demo trades?

10 XTZ.

3. Does it have the capability to control the trading accounts based on pre-defined currency pair?

Of course, for Passive Arbitrage you can setup required pairs:



This is because Passive Arbitrage will create GTC order on the exchange with a big spread and keep it there while it has sense.

Active Arbitrage uses another approach - it takes from DOM "right here right now" - two taker orders. Currently we support blacklists for Active Arbitrage where you can disable some pairs or whole exchanges:

[wozzek23]

Arbitrage is a short-living opportunity and it might be beneficial to the traders who spot it earlier and sporting such opportunity with the help of bots may not be working as when more people are competing each other then the price levels will merge quicker than we could make use of them.

Longer the gaps, bigger the profits. I mean arbitrage must be a kind of secret trading and when more people are chasing it it will not serve its actual purpose. All I am trying to say is, if you got a bot for spotting out the arbitrage opportunities, then you must try to make use of it on your own account confidentially so that you will be enjoying big profits. But, I'm not sure what people are doing by advertising such bots which triggers questions on credibility of such bots.

[TradePatio]

Arbitrage is a short-living opportunity and it might be beneficial to the traders who spot it earlier and sporting such opportunity with the help of bots may not be working as when more people are competing each other then the price levels will merge quicker than we could make use of them.

Longer the gaps, bigger the profits. I mean arbitrage must be a kind of secret trading and when more people are chasing it it will not serve its actual purpose. All I am trying to say is, if you got a bot for spotting out the arbitrage opportunities, then you must try to make use of it on your own account confidentially so that you will be enjoying big profits. But, I'm not sure what people are doing by advertising such bots which triggers questions on credibility of such bots.

The main specialization of our team is the development of enterprise software. We have some knowledge of trading, but we prefer to make money on software and services. Even an arbitrage bot needs a trader to use and control it. In the case of our clients, arbitrge can become an additional income when you have altcoins on several exchanges. Because the example above is a good illustration of "how it sometimes happens" - circular money flow, but usually the ability to trade arbitrage depends on the coins you have right here, righ now.

TradePatio is not just about arbitrage bots. But of course, we are going to sell it by promoting Passive and Active Arbitrage, among other things.

[TradePatio]

By the way, one of the examples when we decided not to add a feature to TradePatio - is intraexchange arbitrage. We developed this bot, it produced some money, but the volume was too small to sell it to many clients. In addition, it was necessary to place servers near the exchange datacenter to minimize network latency, which is quite expensive and can't be done for multiple exchanges at the same time.

The bot was quite smart - for example, it could proceed the arbitrage in parallel. Imagine that we have BTC → ETH → USD → BCC → BTC chain where we could make a profit, and we have enough BTC, ETH and USD balances. In this case, our bot instantly sent BTC → ETH, ETH → USD and USD → BCC orders. And when USD → BCC was completed - sent BCC → BTC order. It made the optimal decision for any combination and if we had all the coins on our deposit, it could complete all steps without having to wait for the execution of any steps to go further.

There was a lot of mathematics, such as bringing all the rounding of coins taking into account commissions (now we're using it for our Active and Passive arbitrage bots), determining which coin we fix the profit in, and so on. But again small volume, and the Exchange was almost always first, so we were second and one or more of our orders had to wait in "maker" status before were executed.

[nelson4lov]

Good work with your both. I know the amount of work your developers have put together into making it work (I'm a developer too). However, as much as I would want to go with the results of your demo trades, I would admit that arbitration is kinda like a thing of the post in the cryptocurrency space. These days, there are tighter spreads across several exchanges. Also, all of these exchanges  (Binance, Hitbtc, Bittrex) have withdrawal fees and even trading fees – all these put together reduces the potential profit to a great deal not to mention the fact that exchanges like hitbtc usually have thin order books.

[JeromeTash]

After seeing ShitBTC exchange on the screenshot, I am quite sure all the profits generate by the bot will all be swallowed by the crazy trading and withdrawal fees from shitBTC.
How many exchanges does your arbitrage bot support so far? shitBTC is a no-go zone for me.

[TradePatio]

After seeing ShitBTC exchange on the screenshot, I am quite sure all the profits generate by the bot will all be swallowed by the crazy trading and withdrawal fees from shitBTC.
How many exchanges does your arbitrage bot support so far? shitBTC is a no-go zone for me.

Now we support 4 exchanges:



But we're going to extend this list up to 10 exchanges. Would be helpful to know what are the most wanted exchanges here?

HitBTC really generates a lot of arbitrages, but other exchanges also do:



For deposits/withdrawals related to the arbitrage both our bots accumulate data in a separate list:

Also, all of these exchanges  (Binance, Hitbtc, Bittrex) have withdrawal fees and even trading fees – all these put together reduces the potential profit to a great deal not to mention the fact that exchanges like hitbtc usually have thin order books.

All withdrawal fees are included in the bots calculations. Also for exchanges with a fixed withdrawal fee we don't add it in the bot calculations when at least one expected withdrawal for this coin is already presents in the Manual Transactions list - because the fee has already been taken into account in the previous arbitrage.

Active Arbitrage has an option to disable withdrawal fee calculations if you need it:

[Strongkored]

Use bot for arbitrage or for trading is not a usuall  I do, but I do arbitrage when see a opportunity and off course I'm calculated the possibility, a fees, time for confirmations for my deposit credited to my balance. The problem for arbitrage is time for coins get confirmation.

[posi]

As others have said time is very important in arbitrage or bot trading and the last time i check it also not that profitable for small capital traders if ones calculate the fees used to execute the whole trade.
I will just advise the OP to create an ANN thread which will explain more about your project and it usefulness.

[LUCKMCFLY]

The truth today arbitration must be or be carried out with specialized bots and have an artificial intelligence so high as to generate profits fast enough between Exchanges, I have seen that this project has good direction, it would be essential that they have more detail to attract To more people, I don't know if they have thought of a beta test mode?

[TradePatio]

I don't know if they have thought of a beta test mode?

You can simply get your free server for 3 days at https://tradepat.io/

And no, you can't test your strategy currently, because real profit of an arbitrage depends on a lot of real-time things that we could simulate but can't predict exactly what will be with your orders. But you could setup it with small volumes and limit number of arbitrages - for example, 1.

I will just advise the OP to create an ANN thread which will explain more about your project and it usefulness.

Thanks, we'll do a bit later - need to prepare an overview video in English.

[TradePatio]

Here's the video: https://youtu.be/h3KdBWwwpdE

And we'll create the ANN thread a bit later - we're going to offer something really interesting, just need to prepare for it.

[rexxarofmoknathal]

The screenshot will of course show generous profits otherwise there will be no point in showing off this arbitrage bot. The question is really how reliable is this result? Has there been a test run to see what the percentage rate of gaining profit is over losing money?

I'm sure that with all of this market turmoil even bots can often get it wrong, but how much it deviates would all depend on the algorithm used to run the bot.