So you are saying exchanges are locking/suspending accounts or trades because they believe the person is doing arbitrage trading?
I don't think so and there is no reason for them to do so because they are not going to lose anything even the other exchange because it is going to bring more transaction fees and withdrawal fees for them which mostly contribute to the exchange's profits.
As much as I wasn't directional in that, it's not impossible. And if I may ask, have you ever tried to research how exchanges lock accounts and give no valid reason for some? Maybe that will tell you why you should be protective of your account without drawing suspicious activity to it to avoid giving them an edge to do so.
Exchanges can not use arbitrary trading to enrich themselves.
Says who?
I've lived in the regulated financial market environment for a very long time to know the sharp practices happening there, and brokers, financial institutions and banks are not innocent in this at all. There are manipulations everywhere, not to talk of the highly unregulated cryptocurrency market. You should trust yourself alone, all those companies are always looking for loopholes and the slightest opportunity to make more money. Manipulating prices for a little while for arbitrage gain by their associates can't be a hard task since they control the system.
When it comes to businesses, trust none absolutely, they won't just do it too obviously. But saying it's not possible means you are too trusting humans and don't know that sharp practices happen even in the sanest places.
1. The risk of Moving funds back and forth whenever the opportunity presents; Here you stand at risk of losing your funds at any time because you will always be in a ghast to catch up with that slight price difference with the other exchange before it goes back to normal and may not be that careful, plus other mistakes you could encounter on the process.
That's one way of doing arbitrage trading but another way which is less risky is to have funds in both places and perform the trades using those funds. For example you have both bitcoin and dollar on exchange A and B. If bitcoin price is higher on exchange A compared to B, you sell some of your bitcoins in A and buy the same amount (or more) in B. This way your net-worth increases while not moving any funds at all.
After some time and many trades where the equilibrium between your balances is no longer there, you can transfer some funds to reach equilibrium again.
I must say you shared the most value here as I never thought of this way and I'm sure many would not. But it requires a whole lot of money to gain through this approach as it would have been more earning for the arbitrageur if the whole money is moved in and out entirely rather than dividing them among exchanges. Take for example, if you are arbitraging with $50,000 and see the opportunity in two exchanges, you get to make more when the whole $50,000 performs the action successfully, but would make less, properly half of the deal if you share the money into two among the two exchanges.
Regardless, your style is the best I've seen so far, it lessens the risk and suspicion even if one is trading with exchanges that frown at it.
