Arbitrage Oscillator Indicator

[Kazu]

I really have no evidence of this but for my own experience,
But it seems as if the difference between Mt. Gox & Bitstamp price serves as a indicator for the future price of Bitcoin. I can't really get any great chart of this, so its hard to visualize, but I've been looking at it and it sure seems like it at the very least confirms the trend.

When the potential for arbitrage across these two exchanges is high, then the price drops. Sooner or later the Bitstamp price starts climbing and the Mt Gox price stops falling, and the spread between the two starts getting smaller and smaller. Indicator to BUY.

While that difference is slowly getting smaller, the price goes up. Eventually the two get at basically the same price, sort of like we are now (Bitstamp ~79.99, Gox ~80.00). Now we wait to see what happens as the spread grows. If the price is going up while the spread is growing, we hold, and hope that the spread starts shrinking to confirm the trend. If the spread grows while the price (at least on gox) stays roughly the same, or even potentially goes downward, we sell.

If this is true, potential implication:

1) There is more arbitrage going on than we may think.
2) We are at a critical turning point now, considering the difference in rates is very low (spreads being low meaning that the price is sort of 'confirmed' as a potential turning point.)
3) Is Bitstamp now potentially leading Gox to an extent??

[vokain]

3) Is Bitstamp now potentially leading Gox to an extent??

I think it is. I use Bitstamp now over Gox (from the US). Other than liquidity, no regrets.

[Kazu]

So gox has successfully broke $80 while Bitstamp is lagging at $79.99. My indicator would indicate buy if the Bitstamp price successfully breaks upward to $81, sell if the Bitstamp price stays where it is and gox goes back below $80, and uncertain should Gox continue to rise with Bitstamp unable to break the resistance.

[Abandon]

I tend to sell when Bitstamp is close to Mt. Gox. You can get a good view of the Bitstamp chart here: http://bitcoinwisdom.com/markets/bitstamp/btcusd

[Miz4r]

I really have no evidence of this but for my own experience,
But it seems as if the difference between Mt. Gox & Bitstamp price serves as a indicator for the future price of Bitcoin. I can't really get any great chart of this, so its hard to visualize, but I've been looking at it and it sure seems like it at the very least confirms the trend.

When the potential for arbitrage across these two exchanges is high, then the price drops. Sooner or later the Bitstamp price starts climbing and the Mt Gox price stops falling, and the spread between the two starts getting smaller and smaller. Indicator to BUY.

During the rally that took us up to 136 there was also a big gap between Bitstamp and MtGox, so I don't think this is a very good indicator.

[Kazu]

I really have no evidence of this but for my own experience,
But it seems as if the difference between Mt. Gox & Bitstamp price serves as a indicator for the future price of Bitcoin. I can't really get any great chart of this, so its hard to visualize, but I've been looking at it and it sure seems like it at the very least confirms the trend.

When the potential for arbitrage across these two exchanges is high, then the price drops. Sooner or later the Bitstamp price starts climbing and the Mt Gox price stops falling, and the spread between the two starts getting smaller and smaller. Indicator to BUY.

During the rally that took us up to 136 there was also a big gap between Bitstamp and MtGox, so I don't think this is a very good indicator.

Note that gox has lost a lot of market share to bitstamp since then. Back then since Gox is generally higher price than Bistamp, if Bistamp followed Gox, it would make sense that the indicator wold have been inverted.