A lesson in arbitrage

[TheDailyBitcoin]

I'm sure that many of the users here already know about this, but just in case.

http://thedailycrypto.com/economics/lesson-on-arbitrage/

Did you know about arbitrage already?

[rmines]

I knew the principles of arbitrage already, but enjoyed reading your article anyhow.
The problem with it is that you need to trade with large sums of fiat, and it takes only 1 bad trade to loose all the profit you've made with the successful ones.

[TheDailyBitcoin]

I knew the principles of arbitrage already, but enjoyed reading your article anyhow.
The problem with it is that you need to trade with large sums of fiat, and it takes only 1 bad trade to loose all the profit you've made with the successful ones.

That's a risk, but a very careful investor can probably minimize the chances of that problem.  Agreed that for any decent profit to be made, you do need a very large amount of capital to start with.  I'd be a rich man if I had the startup capital to do real trading with cryptcoins.

[roslinpl]

I'm sure that many of the users here already know about this, but just in case.

http://thedailycrypto.com/economics/lesson-on-arbitrage/

Did you know about arbitrage already?

It is true, that you can do it. Just always calculate all fees etc... sometimes is worthless.
and you can only do it if exchange is working well - I mean - fast deposit and withdraw

[arbitrage001]

Market is reasonably efficient these days for all the popular coins.

It isn't easy to do arbitrage without taking huge risk.

The btc price difference between mtgox and the rest of the exchanges. Do you have the stomach to send mtgox fiat to buy btc and hoping they can resolve whatever problems they are having right now?

[roslinpl]

Market is reasonably efficient these days for all the popular coins.

It isn't easy to do arbitrage without taking huge risk.

The btc price difference between mtgox and the rest of the exchanges. Do you have the stomach to send mtgox fiat to buy btc and hoping they can resolve whatever problems they are having right now?

Indeed there is always a risk where the profit is.

[Rannasha]

Arbitrage can be done reasonably well with the help of a bot. Opportunities often only last for 10-30 seconds, which means that as a human, but the time you see it, you're typically too late.

Of course, the profits are rather low as a percentage of the amount of money invested. And the market depth is often not enough to perform large arb-trades. But making 1% on a few thousand USD/EUR of volume per day is quite doable with the right software.

[Rawted]

Arbitrage died out when Gox stopped USD codes back in April.

[Rannasha]

Arbitrage died out when Gox stopped USD codes back in April.

There are more exchanges to arbitrage with than just Gox. Granted, you don't get the dramatic price-differences like you get with Gox, but there is some room to play here and there.

[BLCAAN]

You give a good description of arbitrage. A more formal definition ( taken from the book "Arbitrage Theory in Continuous Time" by Tomas Björk ),

The portfolio h is an arbitrage portfolio if it satisfies the conditions

V^h_t=0 = 0
P(V^h_t=1 >= 0) = 1
P(V^h_t=1 > 0) > 0

Where V^h_t is the value process at time t for the portfolio h, where h is defined as a vector of different assets.

[Rannasha]

That seems like a decent condition as a prerequisite, but it hardly describes what is actually going on. That set of expressions simply states that the chance of loss of value should be zero while there is a strictly positive chance of profit. In other words: There has to be the chance for risk-free profit.

[BLCAAN]

That seems like a decent condition as a prerequisite, but it hardly describes what is actually going on. That set of expressions simply states that the chance of loss of value should be zero while there is a strictly positive chance of profit. In other words: There has to be the chance for risk-free profit.

I felt that it would be redundant to rewrite a descriptive text for an arbitrage opportunity, as one is given at the start of this thread. However the conditions given by Björk defines arbitrage which is true in any situation, not only trading assets on a market.
Further I'm fully aware that there exist different formal definitions of arbitrage, I prefer the one given by Björk since I don't like to lose money when hustling.