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Author Topic: Which BTC price do you use for trading?  (Read 985 times)
eroxors
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July 11, 2012, 02:40:54 PM
 #1

Does everyone use Mt. Gox last price for trading or do some use the weighted average or something else?

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July 11, 2012, 04:44:16 PM
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I always use MtGoxLast (or specifically the midpoint between highest bid and lowest ask if there's a significant gap) at the time the transaction hits the network.  I consider it the fairest, because the person receiving the funds has an equal opportunity to instantly convert it to USD if they think the rate is too high, and the economics of that opportunity stay the same no matter how long the person waits to make their payment.

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July 11, 2012, 06:48:28 PM
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Does everyone use Mt. Gox last price for trading or do some use the weighted average or something else?

It depends.  What problem you are trying to solve?  If you are selling bitcoins, you want the best price.   If you are accepting Dwolla, then that person with Dwolla can buy bitcoin at Camp BX and Intersango at a little lower than Mt. Gox's BTC/USD level.  So if you set a price based on Mt. Gox's last, you might not be competitive and might lost the opportunity to do the trade.

These exchanges should trade at roughly similar levels because of arbitrage occurring.  But because of delays when withdrawing from Mt. Gox, there is a price premium when buying on Mt. Gox's BTC/USD market.

For historical data analysis, having exact values aren't critical and the trends over time will be the same.  (e.g., if the price premium when buying at Mt. Gox's BTC/USD is about 2% higher than at other exchanges, then it will likely still be 2% higher a month from now as well.)  So there is no burning desire for an accurate "current price" that draws from all the various exchanges.

The current price is of limited use anyway if larger trading volumes are being considered.  There isn't a terrifically large amount of buying or selling needed to cause the price to move a couple percent either way.  Only what sits in the order books will tell at any point in time what is needed for any trades in the several thousand dollar (or greater) range.

eroxors
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July 12, 2012, 03:46:48 AM
 #4

Does everyone use Mt. Gox last price for trading or do some use the weighted average or something else?

It depends.  What problem you are trying to solve?  If you are selling bitcoins, you want the best price.   If you are accepting Dwolla, then that person with Dwolla can buy bitcoin at Camp BX and Intersango at a little lower than Mt. Gox's BTC/USD level.  So if you set a price based on Mt. Gox's last, you might not be competitive and might lost the opportunity to do the trade.

These exchanges should trade at roughly similar levels because of arbitrage occurring.  But because of delays when withdrawing from Mt. Gox, there is a price premium when buying on Mt. Gox's BTC/USD market.

For historical data analysis, having exact values aren't critical and the trends over time will be the same.  (e.g., if the price premium when buying at Mt. Gox's BTC/USD is about 2% higher than at other exchanges, then it will likely still be 2% higher a month from now as well.)  So there is no burning desire for an accurate "current price" that draws from all the various exchanges.

The current price is of limited use anyway if larger trading volumes are being considered.  There isn't a terrifically large amount of buying or selling needed to cause the price to move a couple percent either way.  Only what sits in the order books will tell at any point in time what is needed for any trades in the several thousand dollar (or greater) range.

When I say trading, I mean buying and selling items with BTC but listed in dollars. I'm just curious what method is most often used, I've been using weighted average, but I think most may be using last.

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July 15, 2012, 09:24:39 PM
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I just let this do it for me: http://btcticker.appspot.com/

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July 16, 2012, 06:20:05 PM
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When I say trading, I mean buying and selling items with BTC but listed in dollars. I'm just curious what method is most often used, I've been using weighted average, but I think most may be using last.

When there is volatility, just like what we are seeing today, weighted average is going to favor the seller when the exchange rate is rising, and favor the buyer when the exchange rate is dropping.  If you are in a low margin business and trade away the bitcoins after each sale, this can cause bit losses when the exchange rate is dropping (as you'll find a lot of buyers taking advantage of the price opportunity).  Also, your prices may not seem competitive when the exchange rate is rising.

So weighted average really is not always a great pricing strategy.  If your margins are large enough, then weighted price is probably adequate in most instances -- there's no profit from gaming you.

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July 16, 2012, 11:49:55 PM
 #7

I don't use last because the bid/ask will often move away from this without a trade happening. My preference is Mt Gox bid but midway is fine too. I can't think of a single trade I've done that has happened fast enough for the number to be exact anyway, so a few cents here and there don't matter.
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